Expectations Mount. It’s a big week for earnings, and investors are feeling optimistic as S&P 500 companies plow through what’s likely to be another quarter of double-digit growth.

The S&P 500 eked out a 0.1% gain today and the Nasdaq Composite rose 0.2%—small but mighty gains considering both indexes closed at record highs.

Those upticks reflect a relatively light earnings schedule on Monday, with heavier days ahead. More than one-third of companies in the S&P 500 will deliver results this week, including much of the so-called Magnificent Seven.

Nasdaq’s bump today could signal that investors are once again enthusiastic about artificial intelligence stocks, but it also means that expectations are sky high.

Companies that haven’t beaten earnings estimates—and raised their outlooks—have “gotten slaughtered in this market,” says Nancy Tengler, CEO and CIO at Laffer Tengler Investments. “And even some companies that did beat, beat, and raise, it wasn’t enough.”

She adds that while investors often place a premium on guidance, outlooks will be particularly crucial this quarter as investors try to figure out whether these AI companies can sustain such high margins.

That’s particularly true considering how quickly the geopolitical landscape has changed. “Corporate earnings may not yet show the full impact of the Iran conflict,” says Mark Malek, CIO at Siebert Financial. “Forward guidance is where companies will start pricing in higher future costs.”

Investors will soon have their answer: Meta Platforms, Microsoft, Google-parent Alphabet and Amazon report Wednesday after the close, while Apple reports Thursday after hours. All five stocks have rallied ahead of their earnings release.

Wall Street has already decided to move beyond war, betting that a lasting cease-fire is likely. That may give these companies an extra temporary boost, but consumers might not be so blithe, Malek warns. Oil shocks haven’t fully worked their way through prices yet.

Nonetheless, with consumer sentiment near historic lows even as the market pushes to fresh highs, it’s clear which cohort has investors’ ears.

The Hot Stock: Sandisk +8.1%
The Biggest Loser: Domino’s Pizza -8.8%

Best Sector: Communication Services +0.9%
Worst Sector: Consumer Staples-1.2%

Another earnings quarter, another great showing from tech, right? Perhaps, but there might be more to the story.

By the end of last week, nearly 80% of companies that had reported results delivered both top- and bottom-line beats, with the median company beating by more than 5%. “This is encouraging and highlights that earnings growth has broadened in recent quarters,” writes David Lefkowitz, CIO head of U.S. Equities, UBS Financial Services.

Certainly, tech is still leading the pack, with analysts estimating that the Magnificent Seven’s earnings per share will grow 22% this year, compared with 11% for the 493 other companies in the S&P 500.

But there are “early signs of estimates being revised higher for the SP493,” writes Morgan Stanley’s Michael Wilson, who sees more broad-based strength than the consensus implies.

And big tech may not be as strong as it seems. My colleague Martin Baccardax wrote today about a new report from Fundstrat’s Hardika Singh, who notes that if you remove Nvidia from the Mag7, the earnings per share growth of the remaining six stocks this quarter falls below the average of the S&P 493.

If that turns out to be the case, it would be the first time since the end of 2022 that the group underperformed.

The AI trade is still likely to remain front and center, but it would be nice to see more sectors join the party.

On Tuesday, American Tower, Avery Dennison, Barclays, Bloom Energy, Booking Holdings, BP, BXP, Centene, CMS Energy, Coca-Cola, CoStar Group, Corning, Ecolab, Edison International, Enterprise Products Partners, Equity Residential, Essex Property Trust, Expand Energy, Extra Space Storage, F5, Fair Isaac, FirstEnergy, Franklin Resources, General Motors, Hilton Worldwide Holdings, Incyte, Ingersoll Rand, Invesco, Kimberly-Clark, Mondelez International, Novartis, NXP Semiconductors, Omnicom Group, Oneok, Paccar, PPG Industries, Robinhood Markets, Seagate Technology Holdings, Sherwin-Williams, S&P Global, Spotify Technology, Starbucks, Sysco, Teradyne, T-Mobile US, United Parcel Service, Veralto, Visa, Waste Management, Welltower, Xylem, and Zimmer Biomet Holdings report quarterly results tomorrow.

S&P Cotality releases its Case-Shiller National Home Price Index for February. Home prices rose 0.9% year over year in January, the slowest rate of growth since June of 2023. Among the 20 metro areas tracked, New York and Chicago led the way with gains of more than 4.5%, while Tampa and Denver were the biggest decliners at more than 2%

The Conference Board releases its Consumer Confidence Index for April. Consensus estimate is for a 89.4 reading, more than two points less than the March figure. Consumer sentiment remains in the doldrums despite record high stock indexes.

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