MW It's still early - but first-quarter earnings already show enough strength to support the market rally

By Michael Brush

Corporate executives with a front-row seat on the economy are broadcasting a bullish message and drowning out Iran war noise

Corporate earnings results are giving stock investors an upbeat picture of the economy's health.

As if the Iran war weren't enough to worry about, here comes earnings season and the insight it gives investors about economic growth.

The good news is that both earnings and the economy will be fine.

At least, that's what corporate executives are telling us. Company insiders have front-row seats on economic trends, so their views say a lot about the economy. Their bullish message is coming through loud and clear in earnings reports and earnings guidance so far this reporting season.

True, I am basing this conclusion on the mere 20 companies that had reported as of April 14. But history shows this sample offers an accurate read on the entire earnings season - and the economy as a whole, according to Nick Raich, CEO at The Earnings Scout, which tracks corporate earnings trends. "In a basketball game," he said, "when you are winning after the first quarter, you usually win the game."

These early reporters give investors a great read on the full earnings season and the economy because they represent a great cross-section of the economy, added Raich, who has analyzed earnings trends and estimate revisions for decades. Consider:

-- These 20 companies provide a read on tech-sector trends because it includes Micron Technology MU, Oracle ORCL, Accenture ACN and Jabil JBL.

-- We get a read on all-important consumer spending trends because the group includes Darden Restaurants DRI, Carnival CCL, AutoZone AZO, Nike NKE, Costco COST, Delta Air Lines DAL and the home-builder Lennar LEN.

-- Paychex PAYX, FactSet Research Systems FDS and Cintas CTAS offer a read on business and financial-sector trends.

-- General Mills GIS Constellation Brands STZ, McCormick MKC and Conagra Brands CAG tell us about spending trends on consumer staples.

-- Shipping bellwether FedEx FDX provides an overall read on the health of the economy.

How to read the tea leaves

The key to reading the earnings revisions tea leaves is to look at the rate of change in guidance on estimates, as opposed to the latest estimates on their own.

Here, companies are offering good news despite rising energy prices and widespread worries about economic growth.

As of April 13, this group of 20 companies boosted second-quarter earnings estimates by 1.22%. That may not sound like a lot. But it stands out as a bullish signal because it is so much higher than the average 2.76% cut in forward-quarter estimates over the past three years.

"These are some of the best revisions we have seen in five years," Raich said in a recent interview. "It's amazing that companies that have reported have not cut their estimates, despite oil prices going up."

One reason for this could be that the U.S. economy is far less dependent on fossil fuels than it was in the past, said economist Ed Yardeni of Yardeni Research. Spending on gasoline as a percentage of disposable income is down meaningfully. He also noted that companies are seeing healthy productivity gains, which helps boost both profits and GDP growth. Higher tax refunds and lower tariffs support consumer spending. Citing these factors, Yardeni put the odds of recession at just 20%.

Here's why inflation may remain tame despite the oil price increase. "The economy's starting point makes large spillovers to broader inflation unlikely," Goldman Sachs economist Manuel Abecasis wrote in a recent research note. "The labor market is softening, wage growth is already below the pace that would be consistent with 2% inflation, and inflation expectations are well anchored."

Other bullish earnings trends

Here are some other bullish earnings season trends so far.

-- Half of the companies in the group of 20 have raised estimates, compared with 32% on average over the past three years.

-- So far, companies have beaten estimates by 9.86% on average, compared with a three-year average of just 3.35%.

-- Around 80% of companies reporting so far beat earnings, suggesting that will be the case for the entire earnings season. This is in line with the average of 82%.

No selloff ahead

Importantly, it looks like the market rally can continue. That's because the ominous earnings revisions and stock price trends that typically precede market weakness are not in place, Raich said.

Here's what he means. Normally, ahead of stock-market declines, stocks are advancing sharply while earnings estimates are being cut at an accelerating rate. This divergence has forecast market declines around a half dozen times in the past three decades.

Right now, earnings estimates overall for the S&P 500 are rising at a healthy 1.9% clip, and stock prices are heading higher. This suggests the market is not vulnerable to further decline.

Favored stocks

By far, the technology sector stands out the most for upward estimate revisions. Companies in this space recently increased second-quarter estimates by 37.26%. "The 37.36% rise in second quarter 2026 estimates after companies reported is easily the best revisions we have gotten in technology in any earnings season over the past three years," Raich said.

Raich highlighted AI-related tech names. "Technology stocks tied to AI have some of the best revisions momentum out there," he said. "Their expected profitability keeps going higher and their stock prices should follow."

Here, Raich singled out Micron, which just guided second-quarter earnings up 82%, an extraordinary increase. Likewise, Nvidia (NVDA) earnings estimates accelerated after it reported earnings in late February. Other tech names his revisions-momentum system favors include Broadcom $(AVGO)$, Alphabet $(GOOGL)$; $(GOOG)$, Apple $(AAPL)$ and ASML $(ASML)$.

Outside of tech, his system favors Home Depot $(HD)$, TJX $(TJX)$, Costco, Coca-Cola Co. $(KO)$, Mastercard $(MA)$, Becton Dickinson $(BDX)$ and Howmet Aerospace (HWM).

Michael Brush is a columnist for MarketWatch. At the time of publication, he owned ORCL, MU, CCL, NKE, NVDA, AVGO, GOOGL and ASML. Brush has suggested MU, CCL, AZN, NKE, COST, DAL, FDX, NVDA, AVGO, GOOGL, AAPL, HD, KO and MA in his stock newsletter, Brush Up on Stocks. Follow him on X @mbrushstocks.

More: Stocks usually take the escalator up and the elevator down. Right now, it's happening in reverse.

Also read: Former Treasury Secretary Henry Paulson warns U.S. needs an emergency 'break-the-glass' plan if Treasury demand collapses

-Michael Brush

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April 17, 2026 12:19 ET (16:19 GMT)

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