The S&P 500 fell by 0.1%, marking the fourth decline in five sessions, yet the drop was surprisingly contained for a day that saw a spike in oil prices on renewed hostilities between the US and Iran. While Meta Platforms and Microsoft dragged the Magnificent Seven basket lower by nearly 1%, the energy sector offset much of the tech drag. The market is juggling geopolitics and earnings prints — and, so far, the numbers are winning.

S&P 500 and Magnificent Seven dynamics

Investors who have watched indices tread water for weeks are pinning hopes on earnings season. Bloomberg Intelligence records a forecast impulse not seen since 2011: many more companies are raising guidance than cutting it. S&P 500 earnings are expected to rise by 26% in Q2, and Deutsche Bank forecasts as much as 29%. By comparison, the average annual EPS growth over the past two decades is around 7.8%.

These anomalous figures are not solely an AI story. Wall Street argues that a recovery in non-chip, non-data-center sectors, which suffered last year from trade tensions, is also contributing. Bloomberg Intelligence expects every sector of the S&P 500 to report year-over-year earnings growth in Q3, the first such broad-based upswing since 2021.

Earnings revision dynamics

That said, the burden of proof has shifted squarely to the management teams of the large tech names. After weeks of selling in Big Tech, investors now demand returns on invested capital, not just ambitious roadmaps. Future profit signals will be scrutinized: will hundreds of billions ploughed into data-centers yield commensurate returns, or will AI-bubble skeptics be vindicated?

UBS remains constructive on the AI growth narrative but recommends balanced exposure across the value chain, from semiconductor makers to defensive sectors, and stresses diversification beyond AI.

Meanwhile, investors have already pared equity exposure to levels where even modestly positive surprises could spark a fresh buying wave. That compressed demand "spring," combined with strong earnings and a record forecast impulse, provides a foundation for the rally markets have been waiting for.

Will corporate profits be strong enough to offset Middle East war fears and doubts over AI monetization? Time will tell.

Technically, the daily chart shows that the S&P 500 is consolidating in the 7,430–7,580 range. A breakout above the top of this range would be a buy signal, while a fall below its lower boundary would be a reason to sell the broad index.