U.S. equities that have run hot through an exceptional earnings season may encounter more turbulence as that corporate-driven support fades and the broader macroeconomic backdrop - notably rising inflation and bond yields - takes center stage.
The benchmark S&P 500 has been resilient this year, trading close to its all-time high and rising by more than 9% year-to-date. The index has notched eight consecutive weekly gains, yet recent market activity has shown signs of fragility as some investors reassess whether strong company results are sufficient to offset emerging macro risks.
"Strength in earnings has allowed investors to look past negative factors such as higher yields, surging oil prices and the ongoing U.S.-Israeli war with Iran," said Anthony Saglimbene, chief market strategist at Ameriprise, noting that the bulk of company reporting is now finished. "Company reporting is kind of done now. Investors are moving beyond the earnings season, and the macro environment is starting to take more center stage," he added, ahead of a shortened trading week for the Memorial Day holiday.
Bond-market move raises stakes
A selloff in Treasuries has heightened anxiety on Wall Street. The 10-year Treasury yield climbed this week to its highest level since January 2025, while the 30-year yield reached its loftiest point since 2007 before both yields retreated somewhat later in the week. Because yields move inversely to bond prices, a rapid rise in Treasury yields can put pressure on equity valuations and raise borrowing costs for consumers and companies.
Market participants have pointed to inflationary concerns and energy-price moves tied to the U.S.-Israeli war with Iran as major contributors to the recent rise in yields. "Inflation concerns continue to flare," said Jim Baird, chief investment officer with Plante Moran Financial Advisors. "You’re seeing upside in long-term Treasury yields that is kind of challenging the bond market and probably puts a practical lid on equities broadly if it persists for some period of time."
Inflation data and the Fed outlook in focus
A critical inflation snapshot is due this week when the April personal consumption expenditures price index is released. The PCE gauge is the Federal Reserve’s preferred measure for assessing progress toward its 2% inflation goal, and it follows recent hotter-than-expected readings from other consumer and producer price measures.
"It will be another data point that likely shows that months of elevated oil prices and supply disruptions are starting to feed through into inflation data," Saglimbene said.
Inflation concerns are already appearing in interest-rate expectations. Futures markets are currently pricing in the possibility of a Federal Reserve rate hike later in 2026, a notable shift from the beginning of the year when markets anticipated interest-rate cuts that would be friendlier for equities. Minutes from the Fed’s most recent policy meeting, released this week, indicated more officials were worried that price spikes associated with the U.S.-Israeli war on Iran could rekindle inflation, and several policymakers signaled openness to raising rates if needed.
"At best, I’d say you’re now in more of an extended pause scenario with the potential for a turn to rate hikes later this year if the inflation story continues to heat up," Baird said.
Other economic releases due this week include a revised estimate of first-quarter GDP and the latest consumer confidence figures, both of which could further shape market expectations.
Earnings season: what it delivered
More than 90% of S&P 500 companies have reported first-quarter results, and aggregate earnings are on track to have risen about 29% year-over-year, according to LSEG IBES data. That outsized earnings performance helped underpin equity prices even as other risks emerged.
"I would say expectations for earnings and economic growth are pretty high," said Scott Wren, senior global market strategist at Wells Fargo Investment Institute. "That’s built into where stock prices are right now."")
With the bulk of corporate reporting largely complete, several retailers are still scheduled to post results in the coming days, including Costco, Best Buy and Dollar Tree. Investors will be watching those reports for clues about whether higher gasoline costs are eroding discretionary spending across other categories. Walmart, often considered a retail bellwether, saw its shares fall after it maintained conservative annual sales and profit guidance.
AI spending and marquee tech results
Artificial intelligence remains a central theme supporting parts of the market. Cloud-software provider Salesforce and hardware and server seller Dell Technologies are among the notable companies reporting, and their results will be scrutinized for signs about enterprise IT spending.
Chipmaker Nvidia, viewed by many investors as a barometer of AI-related demand, surprised on the upside when it forecast second-quarter revenue of $91 billion, exceeding Wall Street estimates. "Nvidia’s results help reinforce that robust AI-related spending trends remain intact," said Brock Weimer, an investment strategy analyst at Edward Jones, in emailed commentary.
Where markets may go from here
With corporate disclosures tapering off, the market narrative appears to be shifting from company-specific fundamentals toward macro drivers. Elevated long-term yields, the trajectory of inflation as captured by upcoming data such as the PCE index, and the Federal Reserve’s response to those trends are now likely to exert a greater influence on asset prices than they have during the peak of earnings season.
For investors and traders, that means near-term market direction could hinge more on macroeconomic releases and shifts in rate expectations than on corporate news. The coming days will therefore be watched closely for signals on inflation, economic growth, and whether the recent run-up in yields has staying power.
Summary
Strong corporate results have supported a rally in U.S. equities, but as reporting wraps up, rising Treasury yields and the prospect of higher inflation are moving back into focus. Key economic data this week, particularly the PCE inflation reading, could influence interest-rate expectations and challenge equity valuations if inflation pressures persist.
Key points
- The S&P 500 is trading near its all-time high, up more than 9% year-to-date, following a strong earnings season.
- 10-year and 30-year Treasury yields reached multi-year highs this week, driven by inflation concerns and energy-price moves linked to the U.S.-Israeli war with Iran.
- With over 90% of S&P 500 companies having reported, overall Q1 earnings are on track to rise about 29% year-on-year, and focus now shifts to macro data like the PCE index and GDP revisions.
Risks and uncertainties
- Persistent or rising inflation could keep long-term yields elevated, putting pressure on equity valuations and borrowing costs for consumers and businesses - damaging for interest-rate sensitive sectors.
- Geopolitical developments tied to the U.S.-Israeli war with Iran are feeding energy-price volatility, which could further exacerbate inflation and influence markets unpredictably.
- With the bulk of corporate reporting complete, weaker-than-expected macro data (for example, the PCE reading or GDP revisions) could remove the earnings tailwind and expose stocks to downside.
Tags: stocks, inflation, yields, earnings, bonds