A Third of the Way There

Wednesday represented one of the largest earnings days for global markets in history: For context, earnings for nearly $15 trillion in equity market capitalization (not a typo) reported in the United States alone. Further, four companies (Alphabet, Microsoft, Amazon, and Meta) represented close to $12 trillion in market cap (also not a typo) — this is larger than the entire equity markets of the United Kingdom, France, the Netherlands and Australia combined.

U.S. large cap equity indices remain tilted toward information technology, so these results carry significant weight. Further, artificial intelligence’s scope and reach dominate public equity considerations beyond tech companies, and the four companies noted above provided insight into the current market’s zeitgeist. While we acknowledge risks that markets overhype AI, we can summarize two key learnings here.

First, demand continues to exceed supply for key parts of the technology infrastructure. Microsoft highlighted that AI compute demand exceeds its ability to provide Azure cloud computing platform access — a sentiment shared by Google with its Google Cloud offering and Amazon with its AWS platform and strong subscriptions for its custom silicon chips. Meta also noted that its own internal AI compute demand exceeds its current infrastructure.

Second, markets continue to focus on spending plans and returns on invested capital. Meta raised its 2026 capital expenditures range and announced a bond offering, sending its stock down over 10% at its low point Wednesday. Microsoft shareholders’ January concerns continued when its updated spending plans exceeded prior guidance; the ongoing spending drag outweighed demand trends. Other companies including Oracle and CoreWeave have faced similar concerns, with shareholders keeping their share prices below 2025 levels. The market’s sensitivity to variations in returns on invested capital and capital expenditure communication is a positive signal. This is unlike other time periods like the dot.com era, when investors assigned premium valuation indiscriminately at both the sector and company levels until markets realized they overextrapolated en masse. 

Earnings and sales growth remain robust for large domestic stocks in the S&P 500. With just over 60% of companies reporting Q1 results as of Friday, revenue and earnings growth are both in double digit territory at 11% and 28%, respectively. While sector trends can skew overall earnings growth metrics, strong sales growth in technology, communications, and financials stand out against relatively low revenue surprises in other industries. As we have shared in prior communications, business and consumer resilience and adaptability remain robust themes.

It is still early days for small company earnings; looking across small cap stocks as represented by the Russell 2000 Index, we are just over 30% complete. Due to  the relatively low percentage of companies in the index with positive earnings (up to 45% of constituents do not have positive earnings based on lifecycle stage, strategic decisions or nature of industry), sales growth can provide more insight into overall trends. Company revenues are up 7% so far this quarter, led by technology and financials. Sales surprises are 3% higher than consensus estimates, with every sector registering positive outcomes versus analyst expectations outside of utilities, which are in early days of their reporting cycle.

From a non-U.S. perspective, earnings season is staggered across regions, but there are a few notable takeaways thus far. With roughly 40% having reported across broad indices, European sales and earnings growth reflect a still-sluggish consumer and business climate, with sales growth barely positive and driven by technology and energy companies. The Japanese equity market remains the global bellwether: While less than a third of Nikkei 225 companies have posted results, 6% sales growth and 19% earnings growth justify the upward propulsion.

To unpack a busy Wednesday in Washington D.C., the Senate Banking Committee approved Kevin Warsh as the next Federal Reserve Chairman. Voting took place along party lines, with 13 Republican Senators voting in favor and 11 Democratic Senators opposed. The next step is a full Senate floor vote expected the week of May 11, requiring a simple majority for confirmation. Ironically, that is the same week that current Chairman Jay Powell’s chair term ends. This could have Warsh preside over the Fed’s next meeting on June 16 and 17.

However, breaking from the tradition of the Chairman departing the Fed at their term’s end, Chair Powell committed to remaining on the Fed’s board as a governor. Powell cited concerns about Fed independence and the potential for the recently closed Department of Justice case to remain a distraction to the Fed. Some suggest Powell’s presence could undermine Warsh’s debut, but during the post-Fed meeting press conference, Powell noted “my intention is not to interfere…I’m not looking to be a high profile dissident.”²

The largest capital market impacts will rest with how Warsh, if confirmed, will change the Fed. During an April 21 Senate confirmation hearing, Warsh described potential “regime change” at the Fed, including how it measures inflation, communication policies, forward guidance and other variables we will only learn about once he is confirmed.³ In that same hearing, Warsh noted that he welcomes a “good family fight” with disagreement among committee members.⁴ With three Fed voting members dissenting with the Fed’s post-meeting communique on Wednesday and another voting member seeking a quarter point rate reduction versus the hold to policy from the committee’s majority, Mr. Warsh’s new “family” appears poised for engagement.

In addition to the Federal Reserve, markets absorbed meetings from the Bank of Japan (BOJ), the Bank of Canada (BoC), the Bank of England (BoE) and the European Central Bank (ECB). No major central bank changed interest rates this week, but we did see some divergences between major entities.

The BOJ kept interest rates at a mere 0.75%, but its policy committee saw three members vote for an interest rate hike while the other six voted for no change. This is the largest split among voters under BOJ Governor Kazuo Ueda. Japan’s equity market continues to lead its major global peers, but markets may need to contend with higher rates this summer: The BOJ cited currency risks (the Yen remains in a 14-year weakening trend, and Bloomberg estimated the BOJ spent $34.5 billion on Thursday alone to stem the Yen’s drop) in addition to energy price concerns.^5,6

In its post-meeting briefing from Ottawa, the BoC emphasized “global upheaval” in characterizing the current backdrop, noting that its governing council is “looking through the war’s immediate impact on inflation but will not let higher energy prices become persistent inflation.”⁷ The BoC expects inflation to rise to 3% this month but gradually fall back to its 2% target by the start of the new year. That expectation has thus far proven challenging to most central banks.

The BoE left its interest rate target at 3.75%, and only one committee member voted for a hike. Like its peers, the Middle East conflict and higher energy prices envelop its thinking: The committee laid out three scenarios for the economy and energy prices, and committee-member recaps suggest  the possibility for avoiding rate hikes should shipping lanes reopen and energy prices ease.⁸

Finally, the ECB demurred on raising interest rates and will revisit at its next meeting in six weeks. The post-meeting press conference featured ECB President Christine Lagarde noting some momentum loss due to the current conflict, but “due to the strong baseline before the conflict, the euro area economy has shown resilience but the war…remains a downside risk.”⁹

In a word, central banks seek optionality as they navigate the unknown duration and depth of the conflict. With the exception of Canada and the United States, the major central banks represent countries and regions disproportionately impacted by higher energy costs. While all countries feel some impact of shipping and hydrocarbon price risks, consumer and business caution amid elevated inflation could pose a more challenging path for our glass-half-full forward perspective.  

¹ Exclusive: Trump rejects Iran’s offer, says blockade stays until nuclear deal. Axios. Accessed 1 May 2026.

² Chair Powell’s Press Conference. FOMC Press Conference. Accessed 30 April 2026.

³ Analysis: Warsh emerges from a difficult hearing with his Fed ‘regime-change’ plan intact. CNBC. Accessed 30 April 2026.

⁴ Ibid

⁵ Outlook for Economic Activity and Prices. Bank of Japan. English edition accessed 1 May 2026.

⁶ Fujioka, Toru. “Japan Likely Spent About $34.5 Billion on Yen Intervention.” Accessed via Bloomberg terminal 1 May 2026.

⁷ Bank of Canada maintains policy rate at 2.25%. Bank of Canada. Accessed 1 May 2026.

⁸ Monetary Policy Summary and minutes of the Monetary Policy Committee meeting ending on 29 April 2026. Bank of England. Accessed 1 May 2026.

⁹ ECB holds rates at 2% as inflation rises and eurozone growth slows. Euro news. Accessed 1 May 2026.