Stocks Go Streaking

Tech Behind Market Rally

Since hitting a low in March, stocks rallied nearly 20% to extend its ninth straight weekly advance for the longest run since 2023. This long streak has only occurred a few times over the last four decades. Over the last three months U.S. large-cap growth stocks are up 16.8%, while U.S. large-cap value stocks are up 3.2%. The growth segment has been led by technology rising 31% during that period. The performance has been largely a result of stronger earnings growth – the S&P 500 index is expected to grow 22.4% in 2026 and 14.8% in 2027, with technology being one of the larger contributing factors to earnings growth. 

2026 Earnings Growth To Be Led by Mag 7, Information Technology, Materials, Energy

Record Q1 Earnings Season led by Technology 

Last quarter, the blended earnings growth rate for the S&P 500 totaled 28.4%, which would be the highest since Q4 2021. On March 31, the earnings growth was expected to be 13%. The catalyst behind the upside in earnings growth was a result of the Magnificent 7 (the seven largest technology stocks in the S&P 500) reporting a massive positive EPS surprise, exceeding estimates by 32.5%. The Magnificent 7 reported an actual earnings growth of 63.2% for the first quarter, slightly below the highest growth rate that these companies reported in Q2 2021 at 89.2%. The blended earnings growth rate for the rest of the companies in the S&P 500 was 17.4%. 

Inflation Accelerates on Rising Energy Costs 

The consumer price index, a measure of the average change over time in prices paid by consumers, ascended to a 3.8% year-over-year level in April, the highest level since 2023. Costs of groceries and gasoline contributed the most to the higher inflation print. The April inflation report showed that gas prices rose almost 28% over the past two months and  grocery prices, which includes items such as meats, dairy, fresh fruits and vegetables, rose by 0.7%, the most in four years. Even excluding food and energy prices, consumer prices increased 0.4% from a month earlier and 2.8% from a year earlier on shelter costs rising the most in two years. 

Settling of Oil Prices 

Consistent with the previous months, the price of oil traded in line with the conflict in the Middle East. As tensions heated up, the price of oil increased and when tensions subsided, the price of oil followed. In May, global oil prices declined more than 20%, with Brent crude oil settling at $92.05 a barrel. Investors are expecting a long-term cease fire deal that could ease disruptions and resume global trade. However, U.S. Department of Energy data showed that distillate fuel declined to the lowest level since May 2003, which expresses how tight the energy environment remains. 

Rate Volatility on Full Display 

The 10-year Treasury yield went on a ride in May, advancing to a high of 4.67%, eventually settling at 4.44%. The volatility in longer-term interest rates can be attributed to higher oil prices driving up inflation. Even short-term interest rates increased, with the 2-year Treasury yield rising to 4%. Market participants have started increasing their bets on Federal Reserve rate hikes in 2026, given the better economic data and higher inflation prints. At the end of May, investors leaned more to a rate hike as opposed to a rate cut in 2026.

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