NEW YORK, July 11 – The powerful rally that has lifted U.S. equities to historic highs faces a critical test in the coming week as investors brace for a fresh wave of corporate earnings and a pivotal inflation report. With the S&P 500 (.SPX) climbing an impressive 26% since April, this upcoming stretch could reveal whether the market’s momentum can withstand growing uncertainties surrounding trade and the broader economic outlook.
The S&P 500 has held steady this week, hovering near record levels, even as President Donald Trump escalated trade tensions by threatening a new round of tariffs targeting more than 20 countries. These measures, set to begin August 1, include higher duties on goods such as pharmaceuticals, semiconductors, and copper. Despite this, investors have largely maintained a risk-on attitude, betting on longer-term fundamentals while tolerating short-term volatility.
According to Chris Fasciano, chief market strategist at Commonwealth Financial Network, market participants are looking beyond the noise of current events. “They’re focusing on the potential for stronger fundamentals into next year. The willingness to overlook near-term instability shows that sentiment is still robust,” Fasciano said.
Still, optimism will be challenged by second-quarter earnings, which are about to take center stage. While a strong first-quarter performance fueled confidence, recent estimates for the current quarter have cooled. Analysts now expect S&P 500 companies to post profit growth of around 5.8% year-over-year, a notable drop from the 10.2% growth anticipated at the start of April.
Yet, there remains hope that corporate America will exceed expectations. In the first quarter, 78% of companies in the S&P 500 surpassed earnings forecasts, a rebound after three straight quarters of declining beats. A similarly strong showing could indicate that businesses are adapting well, not only to shifting tariff dynamics but also to broader macroeconomic challenges.
Several major banks are set to report results next week, including JPMorgan (JPM.N), Goldman Sachs (GS.N), and Bank of America (BAC.N). Their earnings will provide valuable insight into the financial sector’s health and its view of the economy. Investors will also be closely watching tech and healthcare giants such as Netflix (NFLX.O), Johnson & Johnson (JNJ.N), and 3M (MMM.N).
Executives’ outlooks will be crucial, especially in how they address forward-looking decisions on hiring, capital investment, and supply chain strategies amid an unpredictable trade environment. “The uncertainty hasn’t disappeared,” said Fasciano. “But it’ll be telling to hear how much clarity business leaders feel they have now as they look to the longer term.”
Beyond earnings, inflation will take the spotlight with the release of the June consumer price index (CPI) on Tuesday. This report could offer new clues about the direction of prices and whether inflationary pressures are intensifying. Economists are anticipating a 0.3% rise in the Consumer Price Index for June, marking a quicker pace than the increase recorded in May.
The inflation data, combined with Thursday’s retail sales numbers, will shape expectations around the Federal Reserve’s next moves. Many on Wall Street continue to hope for an eventual return to interest rate cuts. However, policymakers have maintained caution, signaling that rising inflation, possibly fueled by tariffs, remains a key concern that could delay any monetary easing.
So far this year, the S&P 500 has gained nearly 7%, supported by strong technology performance and enthusiasm around artificial intelligence. One standout example is Nvidia, which recently reached a $4 trillion market valuation—the first company to do so—driven by overwhelming demand for its AI chips.
The market’s rebound since April has been swift. That month saw a sharp downturn following Trump’s “Liberation Day” speech, which announced a sweeping set of global tariffs. Many of those measures were expected to be paused, but this week brought confirmation that they will go into effect starting next month. Wednesday marked the end of a temporary suspension, and the administration unveiled several new levies aimed at key global industries.
Despite these developments, many investors remain hopeful that the U.S. can avoid the most severe outcomes. There is growing anticipation that Washington will reach agreements with key trading partners such as Japan and South Korea in the coming weeks, which could soften the impact of the proposed tariffs.
Anthony Saglimbene, chief market strategist at Ameriprise Financial, believes this optimistic view is already priced into the markets. “Investors are betting that we won’t see the full brunt of these tariff threats,” Saglimbene explained. “But if those expectations are wrong, and the administration follows through with all its plans, we could see heightened volatility in the short term.”