U.S. markets were relatively calm Monday as Wall Street entered the home stretch of second-quart🎉er earnings season after a volatile week of trading fueled by recession fears.

Trading activity often picks up during the month or so every quarter in which America's largest companies report results. But this past month, especially the last two weeks, has been characterized by abnormal swings in the stock market.

Volatility spiked last week to its highest since the onset of Covid-19 after a 澳洲幸运5官方开奖结果体彩网:soft jobs report and a rate hike from the Bank of Japan sparked a multi-day sell-off.

Those intervening factors, as well as political uncertainty, have cl💞ouded the outlook for U.S. equities coming out of what has for the most part been a soಞlid earnings season.

Below, we look at some of the major themes that have characterized this past quarter's earnings reports.

Profits Are Holding Up

The S&P 500 as a whole was on track to report earnings growth of 10.8% as of Monday, according to data from FactSet. If that ends up being the actual growth rate once all 500 companies have reported, it will be the index’s hᩚᩚᩚᩚᩚᩚ⁤⁤⁤⁤ᩚ⁤⁤⁤⁤ᩚ⁤⁤⁤⁤ᩚ𒀱ᩚᩚᩚighest since the fourth quarter of 2021 (31.4%). 

And compa🉐nies have so far beat earnings estimates at a rate (78%) slightly above bothꦺ the 5-year (77%) and 10-year (74%) averages. 

However, the magnitude of those beats (3.5% on average) has lagged the norm (8.6% over the last 5 years), suggesting some weakness lingers below the surface.

Sales Lagging Earnings

Despite resilient earnings, revenueꦉ growth has lagged profit as consumers and businesses alik🧸e have reined in spending. 

The S&P 500 is on track to report revenue growth of 5.2% fo⛎r the quarter, below the 5-year average of 6.7%. And the percentage of companies reporting better-than-expec🦋ted revenue is also below the 5-year average. 

Top lines have been squeezed in recent quarters by inflation-pinched and 澳洲幸运5官方开奖结果体彩网:cost-conscious consumers. But not every company has felt the pain equally. Burger chain Shake Shack (SHAK) reported its second consecutive quarter of 澳洲幸运5官方开奖结果体彩网:double-digit revenue growth, while competitor McDonald’s (MCD) saw same-store sales decline in the second quarter. 

Analysts have attributed the disparity to the widespread perception that the price gap between fast-food chains and “fast-casual” restaurants like Shake Shack, Chipotle (CMG), and Sweetgreen (SG), has narrowed in recent years.

Executives have also noted the pressure that inflation, a slowing economy, and the evaporation of pandemic savings have put on lower-income Ameri𝓰cans.

Wall Street Sours on Big Tech's AI Spending

🔜 Big Tech companies are♐ spending big on artificial intelligence, and they don’t plan to stop anytime soon. 

Alphabet (GOOGL) and Microsoft (MSFT) increased their 澳洲幸运5官方开奖结果体彩网:capital expenditures (CapEx) by 91% and 55%, respectively, 📖in the quarter, with much of that increase going toward semiconductors and other hardware for AI-powering data centers. Both companies said they expect to spend even more in the next year. 

The cost of Big Tech’s AI arms race scared Wall Street last month. The Magnificent Seven stocks notched a few of their 澳洲幸运5官方开奖结果体彩网:worst days on record during the two weeks when most o🌳f the group reported earnings. 💞

The stocks will be tested again when chipmaker Nvidia (NVDA) reports earnings on August 28. That cloud providers have spent so profusely on AI hardware bodes well for Nvidia’s sales, but expectations are high after four consecutive quarters of triple-digit revenue growth. Even with its recent pullback, the stock could be hit by signs of weakening demand or evidence substantiating reports its next-generation Blackwell chips will be delayed by a design flaw.

Financial Sector Itching for Rate Cuts

The financial sector has reported the third-largest increase in earnings of any sector this quarter. Profit grew by 17.6% from the same 𝕴quarter last year, and all five sub-industries—Insurance, Capital Markets, Consumer Finance,𝔍 Financial Services, and Banks—have reported earnings growth. 

Elevated interest rates were once a boon to big banks, some of the sector’s largest players, as the interest they collected on loans grew. But their deposit costs have since 澳洲幸运5官方开奖结果体彩网:caught up, eating into 澳洲幸运5官方开奖结果体彩网:net interest income, a key financial metric for the industry. 

Now, with the Federal Reserve appearing 澳洲幸运5官方开奖结果体彩网:poised to cut interest rates from their highest levels in decꦡades, the sector approaches an inflection point. Lower interest rates could again pad banks’ interest margins as their deposit costs decline at a faster clip than their income from🐭 fixed-rate loans. 

The sector could also benefit from a pick-up in loan demand and a dash of relief for cash-strapped consumers, among whom credit card delinquency rates recently climbed to 澳洲幸运5官方开奖结果体彩网:a 12-year high.