​​US earnings drive stocks to record highs​​

​​​S&P 500 earnings on track for best growth since 2021

​The earnings story for the first quarter of 2026 has been a strong one. S&P 500 profits are on course to rise 28.2% year on year, the strongest quarterly earnings growth since the fourth quarter of 2021. That is a number that has genuinely surprised to the upside, and markets have taken notice.

​Investor attention, which had spent much of the year fixed on tariff risks and geopolitical uncertainty, has pivoted back towards corporate fundamentals. When companies are delivering profit growth at this pace, it becomes harder to argue against the rally — at least in the near term.

​The broader picture is equally encouraging. The profit strength is not confined to a handful of names. Median earnings growth across the index is solid, and most sectors are on track to post higher first-quarter profits. That kind of breadth matters, even if it does not always make the headlines.

​Analysts have responded by lifting their full-year forecasts. S&P 500 profits are now expected to grow 22.6% for the full year of 2026, a meaningful upgrade from where estimates stood just weeks ago. Markets tend to follow earnings over the long run, and these numbers give the bulls plenty of ammunition.

AI investment drives a new wave of capital spending

​The artificial intelligence theme is not showing any signs of fading. Five of the leading AI hyperscalers — the large technology companies building the infrastructure that underpins AI — are collectively expected to spend $751 billion on capital expenditure in 2026. That is an extraordinary sum, and it is flowing through to the earnings of the companies supplying the picks and shovels.

​This level of investment is creating a self-reinforcing cycle. The hyperscalers are spending heavily, boosting revenues at chipmakers, data centre operators and cloud providers. Those companies then report strong earnings, which in turn justifies the premium valuations in the sector.

​The key question for investors has always been whether the return on this spending would materialise. The Q1 results have gone some way to answering that. Mega-cap technology companies have delivered strong revenue and profit growth, reinforcing confidence that the AI buildout is translating into real commercial returns, not just cost.

​That said, the cycle is still in its early stages, and the durability of this level of capital spending will depend on continued demand for AI products and services. Any sign that returns are disappointing relative to the investment being made could quickly change the mood.

Semiconductors and big tech are leading the charge

​Chipmakers have been among the biggest beneficiaries of the AI investment wave. Large semiconductor groups have added significant market value over recent weeks, with the sector once again establishing itself as one of the clearest ways to gain exposure to the AI theme through shares.

​The performance of mega-cap technology companies has been equally impressive. Strong revenue and profit growth from the largest names in the index have done much of the heavy lifting in driving the S&P 500 to record levels. When the biggest companies in the index are reporting well, the index tends to follow.

​This concentration is worth watching, however. A significant portion of the index's gains are being driven by a relatively small group of AI-linked and mega-cap stocks. That makes the overall market increasingly dependent on continued earnings delivery from a handful of names.

​If that group stumbles — through a profit miss, a shift in AI sentiment, or an external shock — the impact on the index would be felt more acutely than in a more evenly distributed rally. For now, the earnings are justifying the concentration, but it is a risk factor worth keeping in mind.

Valuations have moderated as earnings catch up

​One of the more encouraging dynamics in the current rally is what is happening to valuations. Strong earnings growth has helped lift share prices while simultaneously bringing the S&P 500's forward price-to-earnings (P/E) ratio down from recent highs. In other words, the market is becoming cheaper even as it rises.

​That is a healthier backdrop than the alternative, where prices rise without any corresponding improvement in earnings. When P/E ratios compress on the back of genuine profit growth rather than multiple expansion, the rally is on firmer ground.

​The forward P/E ratio remains elevated by historical standards, and that leaves limited room for further multiple expansion. From here, earnings will need to keep delivering. If profit growth slows or disappoints, there is less of a valuation cushion to absorb the blow.

​For now, though, the direction of travel is the right one. Analysts are upgrading estimates, companies are beating forecasts, and valuations are moving in the right direction. That combination has historically been a supportive environment for stock trading.

The Iran conflict adds a layer of uncertainty

​Not everything about the current market environment is straightforward. The ongoing conflict involving Iran has pushed oil prices higher, and those higher energy costs are feeding through to a number of sectors. Airlines, consumer goods companies, carmakers and parts of the mining sector are all dealing with the headwind from elevated energy prices.

​You can track oil price movements in real time on our oil trading platform. For broader commodity trading, the Iran situation is adding a persistent layer of volatility that is unlikely to resolve quickly.

​The impact is uneven across the index, which is part of why the headline numbers look so strong. The sectors most exposed to energy costs are struggling, while the AI-linked names are largely insulated. The aggregate earnings figure flatters the breadth of the rally somewhat.

​This divergence is likely to persist as long as the conflict continues and oil prices remain elevated. Investors should not lose sight of the fact that for a meaningful portion of the index, the operating environment is more challenging than the headline earnings numbers suggest.

​How to trade or invest in US stocks

​Whether you are looking to trade the momentum in AI and semiconductor names, or take a longer-term view on the S&P 500 through investing for beginners, there are several ways to get exposure.

​For those looking to own US stocks directly, you can buy and hold individual shares or ETFs through the IG Invest app or a share dealing account. This suits investors with a longer time horizon who want straightforward exposure to US equities.

​If you want to trade the shorter-term moves — including the ability to go short if you think the rally is overdone — spread betting and CFD trading give you leveraged access to US indices and individual stocks. Spread betting profits are tax-free for UK residents, while CFD trading losses can be offset against capital gains.

​Here is how to get started:

1. ​Do your research on the US market and identify the companies or indices you want exposure to
2. ​Choose whether you want to invest directly in shares, or trade using spread bets or CFDs
3. ​Open an account with us at https://www.ig.com/uk/application-form, or download the IG Invest app for share investing
4. ​Search for the market you want in our platform or app
5. Choose your position size and place your trade