S&P 500 All-Time High: Q2 Earnings & Big Tech Blowout

In today's market update, we are going to take a look at the S&P 500 hitting a new all-time high. That's exciting. We're going to look at what is driving that, including second quarter earnings. We've had another blockbuster showing so far. And we're going to drill down and look at big tech. We heard from all those names last week. We've got that and a lot more. Let's dive into it.

Well, I am back from vacation and I'll have more on that next week in our second podcast with Jonathan Brummel. You can look forward to that. And we have a new all-time high for the S&P 500. That is very exciting news. You can see, and this is the S&P this year, it had spent about two months going sideways mostly, but in the last few trading days this has launched higher to a new all-time high, driven primarily by earnings.

We're going to talk about that in a minute, but I first have to address another topic. I'm going to put up a chart of the Nasdaq, again very tech-heavy, because you can see the Nasdaq actually saw a decline from its peak in late May, early June, and this was nearly 10%, by the way. It was driven by the chip names. I'm highlighting this because we did a video on June 23rd talking about how to spot a parabolic move. We put up a chart of Micron, and we'll show their latest chart here for you now.

You can see Micron. They make the memory that helps all these AI applications work. This stock was a rocket ship all throughout 2026. And in June, everywhere you turned was very positive things about Micron and Western Digital and SanDisk and Intel, these companies that had all gone up between 100% and 200%. We said this was buyer beware. Another parabolic move reminded us of silver earlier this year, Bitcoin in 2021, and many others that we had seen. And then lo and behold, from that point until the end of July there, you can see that stock dropped down to $823. That was a 34% selloff in a very short time. And by the way, a lot of these other chip names dropped between 35% and 50%. It was a bloodbath for that group, and that really took down the Nasdaq a lot. That is one that we wanted to touch on.

The other name that went down a lot in this time period was SpaceX. We talked about them a lot in videos over the last couple months, and I said I have never seen as much excitement and hype for an IPO as I had with SpaceX. Here's the chart. You can see it came public at $135, raced up to $225 in the first week or so of trading as everybody who could not get enough shares in the IPO went and hit the buy button. But look at what has happened since. Over the last month and a half, SpaceX has steadily gone down and closed just above $108 on the last day of July. This is a decline of over 50% from its peak. We highlighted that in the first four to six months it wouldn't be a surprise to see a selloff of 40% or more. It didn't take long for that to come to fruition. So again, that was one of the things that led to stocks struggling for about a month, a month and a half, especially tech.

Now, one more thing about SpaceX. The challenge this stock was always going to have in the first six months is that shares from employees become available beginning August 6th, where they can sell a small percentage of what they own. And then as things go along, pretty much every week or two, more and more of those shares are going to be available for them to sell. So just something to be aware of over the next couple months. There's going to be a lot of volatility with this name, which we mentioned right at the start.

Okay, let's dive into the main reason that the market is at an all-time high right now, and that is earnings growth. We saw in the first quarter earnings come in at 28%. We talked a lot about how on April 1st expectations were for 13% growth. So you had companies come in much, much better than expected. Now we've had about three weeks of second quarter earnings, and we're going to focus on this because on July 1st expectations were for 22% to 23% profit growth. As of again here, August 4th, S&P 500, you can see there, 48% profit growth. That is absolutely crazy to see that number there, and there are a lot of different sectors who are contributing.

Now one thing I do want to say is that part of what has sent this number up to 48% is that Amazon, they have a huge stake in Anthropic, who of course is Claude's owner. That stake is now worth almost a trillion dollars, and so Amazon made a lot of profits this quarter there, and that's in their number. Google, same thing. They have several holdings that have gone up a lot. If you take those out, which they really shouldn't be out, but if you take those out, this number is near 30%. So not quite as good as this is, but nonetheless, anything north of 10% is good. So we're talking about rarified air here to see any numbers at 30, 40, 50%.

But tech in the lead, as you can see there, 71%. There are a lot of different sectors with big, big earnings growth. I also want to highlight financials up 20%. That's a very key sector. And industrials there, you see up 14%. I can tell you in real time Caterpillar today had a blockbuster profit number, so this industrials number could go up over 20% when the numbers break out tomorrow. So this is absolutely insane to see sectors growing this fast, and this is the second straight quarter we're seeing this.

All right, every quarter we like to talk about some of the standouts from the previous quarter, and we are going to start off here in the financial sector. Like I mentioned earlier, this is a very key part of the market, and two names to highlight. JPMorgan, $21.2 billion in net income. That is the largest quarterly profit in US banking history. Not only that, all of the too big to fail banks, which includes Bank of America and Citi and Wells Fargo, all of them had blockbuster quarters, did very well, saw profits go up a lot. And then Goldman Sachs came in at earnings per share of almost $21 versus expectations of $14.54, and they saw investment banking fees go up 55%. Just all the numbers throughout the Goldman Sachs report were phenomenal. When those two, Goldman Sachs and JPMorgan, are doing really well, generally that means the economy is doing well also.

Looking at Visa and Mastercard, we talk about them pretty much every quarter. Why? Because nobody has a better view into the consumer and spending, as often as we use our cards. Visa and Mastercard once again, double-digit year-over-year growth for revenue, profits, and something called cross-border, which is travel. And both CEO and CFO quotes from both these companies said consumers are continuing to do well, to spend. They are seeing no sign of weakening, and they have been saying that now for almost three and a half, four years, and they have been right.

Now on the industrial side, I mentioned Caterpillar's blockbuster quarter, $8.17 in profit versus $6.20 expected, and they have a $72 billion backlog. That means they've sold products and services for years on out now. A big part of that, by the way, is the buildout of AI data centers. They're doing really well. Also in the industrial space, United Rentals. If you don't need to go buy the equipment, or if you can't get it because of the backlog, you can go to them and rent. They had a monster, monster report. The stock ripped to a new all-time high, almost $13 a share in profits.

Now let's shift gears and wrap this up. Looking at the consumer, Apple. Here's the thing. This name, they have not spent the kind of money that the other big tech names that we're going to talk about in a minute have. They're not spending a hundred, two hundred billion dollars on AI buildout, and a lot of people were wondering, is that a mistake? Well, this quarter shows so far probably not a mistake. 16% revenue growth. The iPhone 17 has been the best-selling iPhone ever, and earnings per share grew at 29%. If you go back just a year, year and a half ago, their revenue growth was flat. It wasn't there. So they are doing very, very well. 22% year-over-year iPhone revenue. That is absolutely astounding.

Coca-Cola, the best quarter they've ever had, and their stock raced to a new all-time high. And then Delta said travel demand is still off the charts, and especially at the front of the plane. They saw nearly $18 billion in revenue, beat expectations all up and down.

And then the last individual name is not consumer. It is an AI software name, Palantir. The software industry as a whole really struggled from the 1st of November all the way through the end of March, and a lot of people were wondering, is AI going to significantly hurt most of these software names? Palantir had been one of the biggest stock winners over the last couple years, but this stock fell from over $200 to $110, dropped over 40%. Well, investors may have made a mistake selling there, because they had 93% revenue growth and they had 62% profit margins. They are making a ton of money. This stock, as we're talking today, is up almost 30% in one day. Amazing. Up and down, 86% of companies are beating expectations so far this quarter. That is the highest number since 2021.

All right, now we are going to focus just on the earnings of the hyperscalers, which are basically the big tech companies. We're talking here, of course, about Google, Meta, Microsoft, and Amazon. In the first half of the year, this group really did not perform very well collectively, and that was a big surprise, because over the last 10 years plus this group has been some of the best stocks in the entire market. There were a lot of people saying these companies are having to spend so much money that the stocks may not work anymore. We took the other side and said we think these are some of the very best companies in the market with the very best management, CEOs included there. And lo and behold, this group is what changed. When we talked about the S&P and you saw that move higher in the last three or four days, that was led by Microsoft and Amazon reporting their earnings last Thursday. It set off a move straight up.

This shows you those four tech names. Revenue growth, $200 billion from Amazon. You can see down to Meta on the far right, $61 billion. But look at the growth in green: 20% growth to 28% between these four in revenue. This is absolutely crazy. If you had said a couple years ago that these companies, by the time they got up to having $200 billion in revenue, that they would be growing at 20% plus, somebody would have said you're crazy, that can't happen. They put up insane numbers, and the biggest driver for it is what you see next: cloud revenue.

This is what we're talking about. If companies want to run these AI applications, they need the compute power. Well, these are the companies, especially Amazon, Microsoft, and Google, that you go to to get it. Amazon's is called Amazon Web Services, AWS. $42 billion, 37% growth year-over-year. That is outstanding. And if you look down below, the profit margin they're making is almost 40%. That grew about 650 basis points over last year. Now again, these companies are spending a ton of money. You look below that, Amazon this year is going to spend around $220 billion to build out their compute ability. This is saying that as they're doing this, their revenue is going up a lot faster because of it, and it's much more profitable. A lot of people did not believe that was going to be the case.

Microsoft, $39 billion, and Azure in particular grew 43%. They don't break out Azure in terms of the total amount of dollars. But the profit margin down there, nearly 41%. That is amazing that they can make that much. And then lastly, Google here, 82% growth on Google Cloud and a 14.9 percentage point increase in profitability. Meta is on the far right. We just want to point out because Meta is not selling compute there, but they did see revenue grow the most of anybody in this group, 28%. So that spending is paying off for them, you could argue. Down at the bottom you see how much all of them are spending, and we have one more chart on that.

This is very interesting, because this looks at the start of 2026, what was expected, versus now on the far right. So here for 2026, at the start of this year it was expected this group was going to spend about $550 billion. Now it's $800 billion basically. And for next year, right now, it was expected at the start of the year that in 2027 this group was going to spend $630 billion, and now it's over a trillion dollars. So these companies are spending. Our point has been these are very well-run companies. If they believe they're going to see very good returns on investment here, we're going to go with them. We're going to agree that that's going to happen. And this quarter showed that's exactly what's happened so far.

All right, now it is time for rapid fire, and this is where we go over some key charts that we think you need to know about. We're starting off looking at second quarter US GDP growth. How fast is the US economy growing? It came in at 1.5%, which is not particularly good, but we went under the hood. This is a long name, this category you can see on the screen, but it's measuring consumer spending, business investment, and housing. It strips out things like government spending and trade and inventories. Over on the far right, you can see this came in at 3.9%, much, much better than the 1.5%. And you can look, that's the best number in two years. When those categories are doing well, typically that is good news for the economy as a whole.

All right, next topic here, talking about gold. Gold doesn't get discussed as much because the gold ETF and gold price are down almost 30% since the high in late January. What this chart in front of you looks at is every year, quarterly central bank purchases of gold. How much are they buying? What you'll notice is this number went up a lot in 2022 and stayed high over the last four years, and that's really what drove gold quite a bit. But take a look at 2026 in brown on the bottom right. That's very small. That's when gold's price was at an all-time high. It had gone straight up, so central banks pulled back a little bit. But in light blue, the second quarter, they had what looks to me like the biggest number since 2014, going back to then, telling you that central banks are back purchasing again. That's one of the reasons why we have been buying more for clients recently. There are a lot of things that say gold's going to go back to an all-time high, in our opinion.

Okay, the next chart here takes a look at how the stock market's done by month from 1990 until now. I just want to highlight this because August and September are the only two months that have been negative overall during that period. Now, it doesn't always work this way. Last year the stock market had been on a nice rally coming into August and September, and it continued to do so. So this isn't a reason to go out and sell because of this. But if there's extra volatility in August or September, don't be alarmed. That is not unusual. And then later in the year, you tend to get a very nice rally, those last two or three months.

All right, the last chart here, we are looking at the rate on a 30-year mortgage, which just hit the highest it's been all year long, 6.8%. You can see this is over the last five years, and for much of the last three or four years it's bounced back between kind of 6% and 7% for most of that period. When rates get up closer to 7%, housing goes into a freeze. Down near 6%, things start to open up. So we're going to be monitoring this. We want to see this come down as we get into the fall in order for housing to get going, because if that happens, GDP will get another surge.

Okay, so the key takeaway is that the S&P 500 is at a new all-time high and it's been powered by a new high in profits. Another phenomenal earnings season so far. If you are new to Sentara Capital, you can go to our webpage, but we have a new investing page on there where you can learn about our investing process and our framework, and also some key mistakes that we see other advisors making.