U.S. stock indexes inched higher on Monday as investors digested a weekend pickup in oil and other commodity prices, and as the bond market responded to Federal Reserve Chair Jerome Powell's remarks at Harvard. Ten-year Treasury yields fell 10 basis points to 4.32% after Powell spoke, reflecting a move toward lower long-term rates.
Goldman Sachs' midday market intelligence framed the current market dynamic as a competition between growth and inflation. On the inflation front, Goldman highlighted a broad-based increase in raw material and energy costs - specifically naming oil, natural gas, aluminum and related derivative products - and warned that these price moves risk passing through to other economies, with particular vulnerability in Asia.
On the growth side, Goldman noted lasting concerns that the uncertainty stemming from the Middle East, together with the recent jump in energy prices, could ultimately slow hiring and dampen U.S. economic activity. Those opposing forces inform the firm's view on where central banks might move next.
In a strategy note released over the weekend, Goldman Sachs strategists Dominic Wilson and Vickie Chang discussed this growth-versus-inflation debate and the implications for fixed income and equity volatility. They concluded that while short-term paths for markets may be complex, there are several scenarios consistent with both falling bond yields and rising volatility in longer-dated equities.
Volatility measures reflected a degree of stability on Monday. The VIX remained below 30, and broader equity volatility, while elevated, did not swing sharply during the session.
Beyond macroeconomic and geopolitical drivers, equity markets are entering first quarter earnings season with a notably high earnings bar. Goldman Sachs analyst Ben Snider observed on Friday that consensus estimates for S&P 500 earnings per share (EPS) growth in Q1 2026 are unusually lofty. Consensus forecasts point to 12% year-over-year EPS growth for the S&P 500 this quarter - marking the sixth straight quarter of double-digit EPS growth and the strongest projected quarterly growth rate since 2021.
Investors, Goldman added, will pay close attention to company commentary on growth trajectories. Capital expenditure tied to artificial intelligence remains a key component of that outlook; Goldman estimates AI-related capex still accounts for 40% of EPS growth in 2026, making corporate investment decisions in technology a focal point for expectations about future earnings.
Market context
- Ten-year Treasury yield: down 10 basis points to 4.32% following Fed Chair remarks at Harvard.
- Commodity pressure: oil, natural gas, aluminum and derivative products rising over the weekend.
- Volatility: VIX remained under 30; equity volatility elevated but stable.
Earnings outlook
Consensus expects 12% year-over-year EPS growth for the S&P 500 in Q1 2026, representing the sixth consecutive quarter of double-digit growth and the highest forecasted quarterly pace since 2021. AI-driven capital expenditure continues to represent a substantial portion of projected EPS gains for 2026.