The Iran war was supposed to break this rally. Corporate America had a different plan.
First-quarter S&P 500 profits jumped 27% so far. That is more than double what the Street had penciled in.
The miss between forecast and real numbers is the biggest since 2013, outside the Covid years.
Bloomberg Intelligence said firms have topped views by the widest gap since at least 2013. The last time profits grew this fast outside a big shock was 2004.
Stock pickers had braced for slower growth. They worried about tariffs and a softer mood among shoppers.
"I don't think I remember a time that sell-side consensus missed actual earnings number by so much," said Charles-Henry Monchau. He is the chief at Banque Syz.
Monchau started the year betting on stocks outside the U.S. He shifted back home as the war and the AI boom played out.
About 85% of S&P 500 firms have beaten views this quarter, per Societe Generale. That is the best hit rate in five years.
The S&P 500 and Nasdaq 100 closed at all-time highs Friday. Stocks have raced from record to record for weeks.
US Bank had set its full-year S&P 500 profit view at $305 to start 2026. The bank now says it has to lift that view.
"We're clearly low," said Robert Haworth, who runs strategy at the bank. He plans to lift the year-end S&P 500 target too.
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The Magnificent Seven posted a 57% jump in Q1 profits. That group is Nvidia (NVDA), Microsoft (MSFT), Alphabet (GOOGL), Amazon (AMZN), Meta (META), Apple (AAPL), and Tesla (TSLA).
The rest of the S&P 500 grew profits 17%. The "other 493" extended their streak of profit growth to eight straight quarters.
Deutsche Bank flagged that all eleven S&P 500 sectors posted positive growth. That is the first time in four years.
The bank then raised its 2026 EPS view by nearly 7% to $342. EPS is profit per share of stock.
Even soft spots like shopper brands, telecom, and health care are back in the green. That is what makes this run stand out from prior years.
The S&P 500 has rallied just over 16% from its March low. It has hovered near overbought levels since mid-April.
That is a signal that a pullback may be near. Hedge funds have turned the most underweight North America stocks versus a global gauge ever, per Goldman Sachs.
The rally needs profit growth to spread beyond AI. Shopper mood near record lows has to start rising too.
Without that, the rally needs a new leg to keep going. Buyers want to see Main Street join the party Wall Street is throwing.
For now, profits are doing the heavy lift. The big question is how long they keep it up.
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