(Oct 7) : Wall Street traders drove stocks to all-time highs on growing bets that Corporate America will be able to weather the threats from still-elevated energy costs and interest rates.

Just a week ahead of the earnings season, the S&P 500 notched its first record since August. An advance in artificial intelligence-related shares also buoyed sentiment, with Nvidia Corp.’s market value approaching US$6 trillion. Advanced Micro Devices Inc.’s Lisa Su predicted “very high” chip demand over the next few years. Treasury 10-year yields fell from the highest since 2002.

While bets on the path for global monetary policy and geopolitical developments have captured investors’ attention, a less discussed factor has been strong earnings expectations, noted Kyle Rodda at Capital.com.

“The US economy remains supportive of corporate revenues and profits,” said Ulrike Hoffmann-Burchardi at UBS Chief Investment Office.“A favorable growth environment and robust earnings suggest profit growth can broaden beyond technology.”

Analysts expect a roughly 25% increase in third-quarter S&P 500 profits from a year earlier, according to data compiled by Bloomberg Intelligence.

“Recent economic growth data have been strong and S&P 500 earnings revision breadth has remained positive,” Goldman Sachs Group Inc. strategists led by Ben Snider wrote in a recent note. “We expect most companies will once again surpass consensus earnings estimates this quarter.”

At Ameriprise, Anthony Saglimbene noted that equities have historically weathered rising-rate periods when the economy and profits kept growing.

“Stocks have room to move higher if the 2027 outlook for growth and profits remains firm, energy prices stabilize/fall, and the Fed signals its rate-hiking path will be short-lived,” he said. “Of course, any advance in stock prices through year-end will likely require a steady AI trade as well.”

As geopolitical fragmentation continues, most major economies are absorbing higher energy prices and tariffs better than expected, according to Tiffany Wilding and Andrew Balls at Pacific Investment Management Co.

“A booming AI investment cycle, the ability of consumers and China to absorb higher costs, and an incremental approach by central banks may help support growth while containing inflation,” they added.

uploaded by Isabelle Francis