U.S. stocks were lower Thursday but still higher for the week, with the S&P 500 on the verge of breaking above 7,400 for the first time ever.

The market's rapid comeback from its selloff in March has come as a surprise to some, given that the Strait of Hormuz remains largely closed and that the threat of a global energy-supply shock is growing.

Another concern has been the market's increasing reliance on semiconductor names and the artificial-intelligence trade more broadly, which suggests this latest rebound could end badly.

Yet the factors undergirding the market's comeback are both relatively straightforward and well-grounded in fundamentals, according to Société Générale strategist Manish Kabra. And perhaps most important, he said this applies beyond the AI trade.

First-quarter earnings results have blown past Wall Street's expectations. This has helped push analysts to rapidly raise their profit forecasts for the balance of the year.

Kabra laid out five reasons stocks are doing so well, in commentary shared with MarketWatch:

-- EPS beats: 85% of S&P 500 firms are beating expected earnings per share, the best hit rate in five years, according to SocGen.

-- Margin expansion: 64% of sectors have seen margin expansion over the past three months. That means margins are improving for both tech and nontech firms.

-- Booming earnings: 73% of sectors are now expected to post double-digit EPS growth.

-- Estimate momentum: 12-month forward EPS estimates are up by 8%, and revenues are up by 4%.

-- Suring AI demand: The companies known as hyperscalers have seen broad EPS and revenue beats. This group is typically defined to include Microsoft $(MSFT)$, Meta $(META)$, Amazon.com (AMZN) and Alphabet $(GOOGL)$, and Kabra also includes Oracle $(ORCL)$.

Estimates for how much these hyperscalers are expected to spend on the continuing data-center build-out in 2026 have boomed, too. Projections for the rate of spending in 2026 have risen to $755 billion after the latest round of quarterly reports, up from $669 billion beforehand. That represents 80% growth compared with 2025.

Two charts showing S&P 500 earnings beats and AI CapEx growth.

Profit growth has been the anchor for this bull market, Kabra said. Fiscal stimulus from the GOP's 2025 legislation known as the One Big Beautiful Bill Act, along with aggressive spending on AI, have helped move things along.

If the Federal Reserve delivers another interest-rate cut, that would help supercharge the rally and transform this market into a "raging bull," he said.

After starting the session higher Thursday, the S&P 500 SPX, Nasdaq composite COMP, Dow Jones Industrial Average DJIA and small-cap Russell 2000 RUT all closed lower.