S&P 500 Posts Best Month Since 2020 as Earnings Broaden

The S&P 500 gained more than 10% in April, marking its strongest monthly performance since November 2020 and recording seven all-time closing highs. Forward earnings estimates increased across large- and small-cap stocks during the month even as geopolitical tensions related to Iran kept oil prices elevated.

Equity gains were broad. The Nasdaq-100 rose about 15%, U.S. small-cap stocks gained 10.4%, mid-caps increased 7.8% and emerging-market equities advanced 9.2%. In fixed income, 7- to 10-year Treasuries declined slightly while high-yield credit returned 1.7%, municipal bonds rose 1.2% and Treasury Inflation-Protected Securities added 1.1%.

The Federal Open Market Committee left the policy rate at a 3.50%–3.75% target range at its April meeting, with an 8–4 vote split among participants. Federal Reserve Chair Jerome Powell warned that inflation risks “remain present,” citing tariff-related price effects and potential spillovers from the Iran conflict as factors that would need to moderate before policy shifts are considered. Powell will remain a Fed governor during the leadership transition; Kevin Warsh is scheduled to take over as chair in June. As of May 1, market pricing implied roughly a 91% probability of no rate change at the next meeting.

Brent crude traded above $100 per barrel through the end of April and briefly rose past $120 on reports of possible military escalation and the UAE’s withdrawal from OPEC. An agricultural commodities index reached a 30-month high. The University of Michigan’s Sentiment Index fell to 49.8 in April, its lowest recorded level, while year-ahead inflation expectations climbed from 3.8% to 4.7%, the largest one-month increase since April 2025.

Corporate results supported the market advance. By April 30, about 63% of S&P 500 companies had reported first-quarter results. Blended earnings-per-share growth for the index increased to roughly 27%, more than double the estimate at the end of March. Consensus estimates for Q1 2026 called for about 12% year-over-year EPS growth, which would be a sixth consecutive quarter of double-digit growth.

Forward earnings estimates rose beyond the largest companies. Median earnings expectations for the S&P 1500 and for small caps in the S&P 600 moved into double-digit territory, according to analysts who cited a rolling recovery in earnings and capital expenditures, fiscal incentives, and continued AI-related investment and reshoring trends as supporting factors.

Results from major technology firms showed varied market responses. Alphabet reported revenue of $109.9 billion, up 20%, with Google Cloud revenue up 63%; Alphabet’s shares rose about 10% on the report. Amazon reported $181.5 billion in revenue and 28% growth at AWS with a 37.7% operating margin; the stock was modestly higher. Microsoft reported $82.9 billion in revenue, up 18%, but a slower pace at its cloud business weighed on the stock. Meta beat revenue and EPS expectations but raised full-year capital spending guidance to more than $140 billion; Meta shares fell following the announcement. Market reactions favored companies showing clearer near-term monetization of AI services while companies emphasizing larger, longer-term AI investments experienced weaker responses.

Investors will monitor the Fed’s June meeting and the leadership transition, additional corporate reports that could refine earnings expectations, and geopolitical developments affecting oil and other commodity markets.