Strong Earnings Keep Markets Supported

Amundi’s latest Weekly Market Directions points to a surprisingly resilient earnings backdrop. With around 80% of S&P 500 companies reporting, Q2 blended earnings growth is running at ~52% YoY, while more than 80% of reporting companies have beaten expectations — the highest beat rate in five years. Europe is also showing solid momentum, with blended earnings growth of 26%. 

• The earnings recovery is broadening beyond technology, with Energy, Financials, Industrials and Materials also contributing.
• The Eurozone Composite PMI returned to expansion at 52 in July, while U.S. manufacturing strengthened to 55.6. 
• Markets benefited from stronger earnings and hopes of easing Middle East tensions: oil fell on expectations of increased traffic through the Strait of Hormuz, while Treasury yields declined and gold advanced. 

The key message: earnings remain strong, but investors are becoming more selective, looking beyond headline beats toward guidance and the quality of underlying growth