Good morning, investors. We market-watchers have a big afternoon ahead of us.
Earnings from Microsoft, Amazon, Meta and Alphabet
The Fed expected to keep interest rates on hold
Jerome Powell’s final press conference as Fed Chair
And all of that, in one way or another, ties back to the one number we’re unpacking below.
Corporate firepower
Corporate America looks more profitable than ever.
S&P 500 companies are on track to post a net profit margin of 13.4% for the first quarter of 2026, according to FactSet, the highest mark since the data series began in 2009.
That’s up from 13.2% the prior quarter, the 12.8% from a year ago, and the five-year average of 12.3%.
Even though earnings growth gets the headlines, expanding margins are what actually drives stock prices.
“Earnings growth drives the narrative around price/earnings ratios, but it is trends in structural profitability that actually change investors' perceptions of underlying value,” said DataTrek Research co-founders Nick Colas and Jessica Rabe.
For example, a company earning 20 cents on every dollar of sales is worth more than one earning 15 cents, even with identical revenues.
That dynamic is playing out across the entire index right now.
And while Big Tech is leading the way, other industries are close behind.
DataTrek points out that six S&P 500 sectors are running net margins above their five-year averages:
Financials
Industrials
Utilities
Communications
Consumer Discretionary
Technology
Wall Street expects what comes next to be just as promising.
Net margins are forecasted to climb to 14.1% in the second quarter and 14.6% in the third to reach levels that the S&P 500 has never touched.
The numbers look even more impressive when you put them against the backdrop of the ongoing geopolitical conflict and elevated oil prices, two variables that historically weigh on profits.
Chart courtesy of Exhibit A
“New record highs for S&P 500 net margins fully support the index’s rally to new highs and also argue for further upside momentum,” wrote Colas and Rabe.
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Market snapshot
Elsewhere
🛢 The UAE will leave OPEC on May 1. It was the third largest producer in the oil cartel behind Saudi Arabia and Iraq, and the announcement comes as a shock to global energy markets. (CNBC)
🤖 OpenAI reportedly missed on key revenue figures and growth. A new report raised concerns about the ChatGPT-maker’s IPO prospects, and whether compute spending is sustainable at current revenue levels. Chip stocks sold off on the news. (WSJ)
🏦 Jerome Powell could stick around the Fed after his term ends. Today likely marks his last press conference as chairman, but he could choose to continue as a central bank governor until 2028, particularly as political questions hang in the balance. (Yahoo Finance)
Interview
I sat down with Jay Woods, chief market strategist for Freedom Capital Markets and a three-decade veteran of Wall Street. We discussed Magnificent 7 earnings, specific stock and sector picks, why financials are set to rally, and more.
Tune in Spotify, Apple Podcasts, or YouTube.
And if you can take 60 seconds to leave a review on the show, please do!
Rapid-fire
The bond market’s prolonged calm stretch suggests a sharp repricing looming (Barron’s)
Jamie Dimon warned that “some kind of bond crisis” is likely with debt rising (CNBC)
GM expects a $500 million tariff refund from the government (AP)
This beat-down AI infrastructure stock could double in 2026 as enterprise contracts roll in (Best Ideas Club)
Boomers aren’t leaving money to the kids, they’re spending it on these 2 stocks (ProCap Insights)
The Magnificent 7 without Nvidia look like the slow stocks in the S&P 500 (Opening Bell Daily)
On this day
🗓 April 29, 2020: The Fed held rates near zero and pledged to use its full range of tools to keep the economy alive through the COVID-19 shutdown. Chair Jerome Powell promised the central bank would act "forcefully, proactively, and aggressively.”
Last thing
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