Investors look to upcoming earnings to keep stock rally going

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With interest rate cuts on the backburner, Wall Street is looking to corporate earnings to continue powering the 2024 stock market rally.

Analysts polled by FactSet expect second-quarter earnings of S&P 500 companies to grow about 8.7% on average from the prior year. That would mark the fourth-straight quarter of annual earnings growth for the benchmark index.

Strong corporate earnings have helped the S&P 500 gain a whopping 16% and notch repeated record high closes this year. That’s despite sticky inflation during the first quarter pushing interest rate expectations further out. While data in recent months has signaled that inflation is cooling again, the Federal Reserve penciled in just one interest rate cut for 2024 at its June policy meeting.

Investors are now forecasting up to three cuts, but at the beginning of the year, they were projecting up to six or seven.

Federal Reserve Chair Jerome Powell said Tuesday at a central bank policy forum in Sintra, Portugal, that prices are back on a “disinflationary path.” But he maintained that the central bank needs to see more data before easing rates.

Since the Fed isn’t likely to cut rates anytime soon, the onus is on strong corporate earnings to continue driving the market rally. High interest rates tend to weigh on stocks, since they increase corporate borrowing costs and make virtually risk-free government bonds more attractive.

“Earnings growth will be key to holding, or potentially building on these gains,” wrote Jeffrey Buchbinder, chief