Recently, several top Wall Street institutions have pointed out preliminary signs that U.S. corporate earnings growth is beginning to spread to a broader range of sectors, which supports the continuation of the bull market in U.S. stocks. Although the earnings season is still in its early stages, data indicates that earnings improvements are no longer limited to the artificial intelligence and tech giants that have dominated the market in recent years.
Analysis by JPMorgan shows that among the S&P 500 index constituent companies that have released their 2026 performance outlooks, approximately half have provided guidance exceeding market expectations. JPMorgan strategists noted that, as most companies that have reported results are not from the technology sector, this trend suggests that growth in other industries is expanding this year. Goldman Sachs’ strategy team also expects earnings to support the broadening of the market rally, predicting that strong economic growth in the first half of 2026 could bring more significant short-term benefits to smaller, more cyclical stocks compared to large-cap stocks.
Market performance also confirms this trend. After three years of tech giants dominating the market, the pattern of gains is changing. Recently, the market-cap-weighted S&P 500 index rose by about 1%, while the equal-weighted index, which better reflects overall market performance, rose by nearly 4%. Additionally, the proportion of stocks trading above their 200-day moving average has approached its highest level in the past year.
Morgan Stanley Wealth Management emphasized that despite heightened market volatility, macroeconomic fundamentals remain resilient, providing a basis for investors to stay in the market. The significant expansion of market breadth is seen as proof of underlying strength. Specifically, biotechnology, banking, natural resources, as well as small-cap and mid-cap stocks have all participated in the current market rebound. This broad-based participation further validates the diffusion of market momentum.
Analysts generally expect the earnings growth gap between the “Magnificent Seven” tech giants and the other S&P 500 constituents to narrow. This has shifted investor focus to traditional economic sectors such as banks, consumer goods companies, and mining firms. For example, Procter & Gamble (PG) saw its stock price rise 2.7% in a single day after stating that U.S. sales had rebounded and expressing confidence in meeting full-year expectations. United Airlines (UAL) also saw its stock price rise after forecasting strong full-year performance driven by growing demand.
Goldman Sachs strategists have also issued a warning, noting that there is a high threshold for sustaining the earnings growth momentum over the long term. Current forecasts show that S&P 500 companies are expected to achieve 15% earnings growth in 2026, still higher than the 10% increase projected for the equal-weighted index. The bank anticipates that U.S. economic growth may slow in the second half of 2026 and into 2027, which could limit the room for the market rotation to broaden further.
