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Intel’s CEO Lip-Bu Tan opened Thursday’s earnings call by invoking Andy Grove’s “only the paranoid survive.” By the close on Friday, Intel shares had surged more than 22%, per Fortune. The S&P 500 was at a record. Tan’s first full year at the helm just produced the quarter that nobody on Wall Street had expected.
In that same earnings week, American Airlines filed updated guidance that landed like a gut punch. The airline now expects an adjusted loss of up to $0.40 per share for full-year 2026, per its latest 8-K filing. In January, it had guided for a profit of $1.70 to $2.70. That’s not a revision. That’s a different company operating in a different economy. The one where Brent crude trades above $105 and the Strait of Hormuz hasn’t reopened.
Both companies sit in the same index. That index closed Friday at 7,165.08, up 0.80%, per Yahoo Finance. A fresh all-time high. The Dow fell 0.16% on the same day. The Nasdaq surged 1.63%. Three indices, three directions, one market that can’t agree with itself about what’s happening.
The Numbers That Got It Here
FactSet’s Earnings Insight report from Thursday tells a remarkable story at the surface level. With 28% of S&P 500 companies having reported Q1 results, the blended year-over-year earnings growth rate stands at 15.1%. That’s the sixth consecutive quarter of double-digit growth. Put that in context: the five-year average beat rate for EPS is 78%. This quarter, it’s running at 84%. Revenue growth is tracking at 10.3%, which if sustained would be the highest since Q3 2022.
And the margins. The blended net profit margin for Q1 2026 is 13.4%, per FactSet. If that number holds through the rest of the reporting season, it will be the highest net profit margin the S&P 500 has ever recorded since FactSet began tracking the metric in 2009. The previous record was 13.2%, set just last quarter. Information Technology is leading the way at 29.1%, up from 25.4% a year ago.
The forward 12-month P/E ratio sits at 20.9, per FactSet, above the five-year average of 19.9 and the ten-year average of 18.9. For reference, it was 19.7 at the end of March. The market got more expensive in three weeks while a war continued in the Middle East and oil added another $10 a barrel.
The Companies That Didn’t Make the Highlight Reel
FactSet flagged something in its sector breakdown that deserves more attention than it’s getting. Of all eleven S&P 500 sectors, Energy is the only one where analysts have revised earnings estimates downward since the start of the quarter. That sounds counterintuitive with oil above $100. It isn’t. The Energy sector’s problem isn’t the commodity price. It’s that the companies can’t get the commodity to market. Production shut-ins, per the EIA’s April Short-Term Energy Outlook, reached 9.1 million barrels per day in April. Revenue is theoretical when the strait is closed and Iran is building a toll revenue model that removes the incentive to reopen it.
ServiceNow dropped 18% on Thursday after its earnings call revealed that Middle East clients had frozen enterprise software contracts indefinitely, per CNBC’s coverage of the results. Honeywell missed estimates and guided down, citing supply chain disruptions tied to the Hormuz blockade. American Airlines’ guidance collapse speaks for itself. The airline industry’s problem isn’t demand. It’s that jet fuel costs have risen roughly 40% since January and hedging at these levels would lock in losses for the rest of the year.
The Motley Fool’s David Dierking captured the broader trajectory in his Friday analysis: the S&P was down 7% on the year barely two weeks ago. Then optimism about a ceasefire emerged, the index erased every loss in a single week, and now it’s sitting at an all-time high. The S&P had already touched a record on Wednesday when Iran simultaneously attacked three commercial vessels. The 24/7 Wall Street team noted that the April 17 ceasefire announcement alone was enough to take the war premium out of stocks. But the ceasefire has since frayed. Trump cancelled the Islamabad delegation on Friday. The strait remains shut. And the index is higher than it was when the ceasefire was supposedly the catalyst.
Who’s Actually Making Money
Strip away the index-level headline and the earnings season reveals a market running on two separate engines. The companies beating estimates are overwhelmingly the ones with zero oil exposure: semiconductors, cloud infrastructure, streaming, enterprise AI. Intel’s surge of more than 22%, per Fortune, came after the company reported revenue of $13.6 billion, growing 7% year-over-year in a quarter where analysts had expected a 2% decline. It wasn’t just about Intel’s own results. It was the market repricing the entire chip complex after a quarter that confirmed CPU demand is accelerating regardless of what happens in the Persian Gulf. The semiconductor supercycle that pushed South Korea’s Kospi past 5,500 is the same demand wave Intel is riding. Tan told analysts on the call that demand would have been even higher had Intel been able to produce more chips, per Fortune’s coverage.
Netflix announced an expanded share buyback program and posted earnings that included a $2.8 billion termination fee from Warner Bros., per FactSet. Penn Entertainment crushed estimates on the back of domestic gambling revenue that has nothing to do with global energy markets. Texas Instruments had its best day in years after an earnings beat driven by automotive and industrial chip demand, per multiple earnings wire reports.
On the other side: airlines, industrials with Middle East supply chains, enterprise software companies with Gulf clients, and energy producers who can’t ship. It’s a clean split. For reference, the S&P’s equal-weight index, where every stock carries the same influence, is trailing the market-cap-weighted version by several percentage points this year, per Investing.com’s style-box analysis. That gap is the mathematical fingerprint of a market being carried by its largest names while the median company struggles.
Why It Matters for the Index
Next week is the heaviest of the earnings season: 180 S&P 500 companies report, including 11 Dow 30 components, per FactSet. It’s also the week four central banks announce rate decisions: the Bank of Japan on Tuesday, the Federal Reserve on Wednesday, with Trump’s hawkish Fed Chair nominee Kevin Warsh adding another layer of uncertainty to the rate outlook, and the Bank of England and the ECB on Thursday. On top of that, US GDP and Core PCE data land on the same week that March CPI confirmed inflation is running at 3.3%.
The market is walking into this week at an all-time high, with record profit margins, a forward P/E above its ten-year average, and an oil price that hasn’t been this elevated since the 2022 invasion of Ukraine. Put that combination together and the risk is asymmetric. Positive surprises are already priced in at 84% beat rates. The upside from here requires everything to go right. The downside requires one central bank to say the wrong word about inflation, or one Mag 7 name to miss, or one headline from the Strait of Hormuz.
Carson Wealth’s research, cited by Motley Fool, shows the S&P 500 has averaged roughly 5% returns in midterm election years since 1950, the lowest of the four-year cycle. But the post-low bounce in midterm years averages over 30%. If the March trough near 6,300, when the S&P was down roughly 8% on the year per Motley Fool, was the cycle bottom, the current level of 7,165 represents approximately a 14% move off that low. There’s historical precedent for it to continue. There’s also historical precedent for it to retest.
The earnings season so far says the American corporate machine is running at its most profitable level ever. The geopolitical backdrop says the fuel that powers half the global economy is being held hostage in a strait that briefly cracked open in early April and then sealed shut again. Intel had a great quarter. American Airlines lost its entire year. Both of those things are true at the same time, and the index decided to celebrate the one that felt better.
The market is telling anyone paying attention what it thinks happens next. Whether it’s right is the only question that matters heading into the biggest week of the year.
