According to Zhitong Finance APP, the strong performance of the U.S. stock market's second-quarter earnings season so far indicates that the profit engine of American companies is running well, which may help alleviate market concerns about the potentially overheating momentum of record gains in U.S. stocks. Data shows that as of Thursday's close, about one-third of the companies in the S&amp;P 500 index have reported earnings, with approximately 83% of companies exceeding analysts' expectations, likely setting a record for the highest &#34;surprise&#34; ratio since the second quarter of 2021.
<img src="https://imageproxy.pbkrs.com/https://img.zhitongcaijing.com/image/20250725/1753439982491950.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="11.png" original-src="https://imageproxy.pbkrs.com/https://img.zhitongcaijing.com/image/20250725/1753439982491950.png"/>
The S&amp;P 500 index has risen 28% since hitting a low on April 8 and has reached new highs in recent weeks. The equal-weighted S&amp;P 500 index has also set a record high. This round of gains in the U.S. stock market comes as concerns about the impact of tariffs on the economy have eased, with investors gradually returning to the stock market, moving away from the previously extreme risk-averse sentiment.
Mark Hackett, Chief Market Strategist at Nationwide, stated that for the current rally in U.S. stocks to continue, corporate earnings need to keep surprising investors, and this earnings season is showing such potential. Mark Hackett said, &#34;As some pessimistic expectations gradually fade, corporate management's statements are no longer so conservative, and earnings expectations for 2025 and 2026 are also being revised upward, providing a tailwind for the market.&#34;
Most companies have exceeded analysts' expectations, even though these expectations were already lowered due to uncertainties in trade policy and economic growth prospects. Data shows that before this earnings season began, the market expected a year-on-year earnings growth of 2.8% for S&amp;P 500 index constituents in the second quarter, while the overall earnings growth rate has now reached 4.5%.
Several large companies are optimistic about their outlooks. Google's parent company Alphabet (GOOGL.US) stated that demand for artificial intelligence products boosted quarterly sales. Homebuilder D.R. Horton (DHI.US) and PulteGroup (PHM.US) reported earnings that exceeded expectations, driving strong rebounds in their stock prices. Netflix (NFLX.US) raised its full-year revenue and profit margin expectations. Levi's (LEVI.US) indicated that it expects sales growth to offset the impact of tariffs.
Meanwhile, economic data also shows no significant risk signs in the short term. The U.S. Department of Labor reported on Thursday that the number of initial jobless claims fell for the sixth consecutive week, indicating that the labor market remains resilient. Bret Kenwell, an investment analyst at eToro, stated, &#34;While the labor market is not operating at full capacity, it is not showing any signs of pressure.&#34; He pointed out that this will help reassure investors.
However, the U.S. stock market is not without risks, with the most frequently mentioned concern being high stock market valuations. Currently, the expected price-to-earnings ratio of the S&amp;P 500 index is about 22.5 times, while the average over the past 10 years is 18.6 times. This has raised market concerns about &#34;no margin for error.&#34; In fact, companies that fail to meet both earnings and revenue expectations are facing the most severe stock price penalties since the third quarter of 2022
In addition, the market has shown some signs of &#34;bubbles.&#34; For example, the so-called meme stocks have once again experienced a crazy surge, reminiscent of the extreme enthusiasm among investors in 2021.
John Kolovos, Chief Technical Market Strategist at Macro Risk Advisors, stated: &#34;The biggest risk factor in the market right now is still overly optimistic sentiment. Some Wall Street trading desks have advised clients to hedge against potential changes in Federal Reserve policy or tariff trends that could worsen investor sentiment.&#34;
High valuations are also one of the reasons why Dec Mullarkey, Managing Director at SLC Management, closely monitors earnings &#34;exceeding expectations,&#34; while he is even more focused on companies' guidance for the future. He pointed out: &#34;Stronger-than-expected earnings reports provide support for the stock market, but the current market demands are very strict; companies must present a solid narrative and strong guidance.&#34;

GOOG

NFLX

GOOGL

The performance of the U.S. stock market during the second quarter earnings season was strong, with approximately 83% of companies exceeding analysts' expectations, marking the highest percentage of positive surprises since the second quarter of 2021. The S&P 500 index has risen 28% since April 8 and has repeatedly reached new highs. The continued growth in corporate earnings is expected to support the upward trend in U.S. stocks and alleviate concerns about overheating in the market. Many companies are optimistic about the future, with firms such as Google, Horton Homes, and Netflix all releasing positive earnings forecasts

- The strong performance of U.S. companies in the second quarter earnings season indicates a robust earnings engine, alleviating concerns about an overheated market.  
- Approximately 83% of S&P 500 companies reporting have exceeded analyst expectations, with overall earnings growth reaching 4.5%, surpassing initial forecasts of 2.8%.  
- Despite optimism, risks remain due to high market valuations and potential investor sentiment shifts, prompting some analysts to recommend hedging strategies.

The US stock market starts the Q2 earnings season strong! The corporate profit engine continues to drive momentum, likely supporting the upward trend