From the desks of Stanley Katz & Lauren Madera
HAPPY MOTHER’S DAY!
“MOTHER’S HOLD THEIR CHILDREN’S HANDS FOR A SHORT WHILE BUT THEIR HEARTS FOREVER.” — UNKNOWN
Stocks climbed for the week ending May 9th, with the Nasdaq posting the sharpest gains (DJIA: +0.22%, S&P 500: +2.33%, Nasdaq: +4.51%). According to T. Rowe Price, the rally was driven by strong corporate earnings — about 85% of S&P 500 companies had reported, and roughly 85% of those topped consensus estimates by an average margin of 19%. Information technology led the index, lifted by positive news flow around AI infrastructure and consumption. The labor market also provided a lift: April nonfarm payrolls came in at 115,000, well ahead of the 62,000 expected, and continuing jobless claims fell to their lowest level since 2024. Not everything pointed up though. The University of Michigan’s consumer sentiment index fell to 48.2 in early May, its lowest reading on record. Survey participants cited higher gasoline prices and tariffs as primary concerns. The strength under the hood of this market may be best captured in the earnings numbers themselves.
The backdrop behind those earnings beats looks historically strong. According to Zacks Investment Research, first-quarter S&P 500 earnings are on pace to hit $690.4 billion, a new all-time quarterly record topping last quarter’s prior high of $655.5 billion. Of the 392 index members that have reported, earnings are up +21.7% from a year ago on +10.5% higher revenues. 80% beat earnings-per-share estimates. When estimates for the remaining companies are included, total Q1 earnings growth is expected to reach +24.2%. Technology is the headline driver, posting expected earnings growth of +50.1% for the quarter. Much of that story runs through the Magnificent Seven’s four AI hyperscalers — Alphabet, Amazon, Microsoft, and Meta — which collectively spent $125 billion in Q1. Their combined 2026 capital expenditure budgets total $725 billion, up 77% from last year. Alphabet grew cloud revenue by a whopping 63% in the quarter, while Amazon posted cloud growth of 28%. Microsoft, by contrast, disappointed for the third consecutive quarter, a streak Zacks partly attributes to its heavy reliance on OpenAI for its large language model. Nvidia is the only Mag 7 member yet to report, and earnings are expected to more than double year over year. Looking ahead, Q2 S&P 500 earnings estimates have moved steadily higher in recent weeks, rising from +17.1% at the end of March to +20.8% today — a trend that raises the question of where opportunity may still lie within these markets.
J.P. Morgan Asset Management’s latest Global Equity Views offers a useful frame for that question. The firm observes that equity markets have continued to shrug off geopolitical headwinds; in their view, the AI investment boom is now large enough to outweigh the drag from elevated energy costs. J.P. Morgan raises an important nuance, however: strip out AI enablers and the energy sector, and U.S. earnings growth this year runs closer to a more modest 8%. The report highlights two areas worth watching. First, so-called “AI losers” (particularly, software and IT services companies) have seen steep valuation compression. SaaS (software-as-a-service) names have de-rated nearly 60% since early 2025, and J.P. Morgan suggests that not all of those companies belong in the penalty box. Firms with strong fundamentals and lower disruption risk may be undervalued. Second, the report makes the case for quality stocks (i.e., companies with solid balance sheets and consistent earnings), which have lagged broader markets in recent quarters but have historically performed well when volatility is elevated and valuations are under pressure. Both are long-cycle arguments that may take time to play out, but the data suggest to J.P. Morgan that the setup is becoming more favorable.
Below are links to a number of third-party research reports that we have read and analyzed over the past week. We hope you will find the information interesting, useful, and worthwhile.
Zacks:
J.P. Morgan Asset Management:
Capital Group:
Argus:
First Trust:
Stanley Katz & Lauren Madera, Financial Advisors
ClientFirst Financial Strategies, Inc.
937-293-5500
Source for weekly stock market returns: Barron’s.
Investing involves risk, including the possible loss of principal. The information contained herein has been prepared solely for informational purposes. Nothing contained herein should be construed as a recommendation to either buy or sell any security or economic sector, or implement any strategy discussed. Please consult with your financial advisor, accountant, and/or attorney before acting on this information. ClientFirst Financial Strategies, Inc. is a DBA of OneSeven, LLC (OneSeven). OneSeven is an investment advisor registered with the U.S. Securities and Exchange Commission (SEC). Registration with the SEC does not imply a certain level of skill or training. Investment Products are Not FDIC Insured, Offer No Bank Guarantee, and May Lose Value.
OneSeven does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third parties.