Wall Street Prices In Strong Earnings While Costs Keep Rising

The visible setup for U.S. earnings season is still strong. As of April 10, FactSet said the S&P 500 was expected to post 12.6% year-over-year earnings growth for the first quarter of 2026. Reuters, citing LSEG data on April 13, put the figure near 13.9%. Those are not recession numbers. They tell you analysts still see a healthy profit picture, even after a rough stretch of energy volatility and hotter inflation prints.

That helps explain why the market has stayed willing to lean into the upside case. Reuters reported on April 13 that the S&P 500 had rebounded nearly 8% from its March low. The market is not trading like it expects a broad earnings miss. It is trading like corporate America can keep carrying the macro noise.

But that confidence has a narrow base. Reuters reported the same day that big tech is expected to generate about 80% of first-quarter earnings growth. That does not make the earnings story fake. It does make it concentrated. When a small group does most of the lifting, the index can look sturdier than the average company beneath it.

The harder part of this setup sits in the cost line, not the revenue line. The Bureau of Labor Statistics reported on April 10 that March CPI rose 0.9% from the prior month and 3.3% from a year earlier. Gasoline was a major driver. Reuters also reported on April 7 that New York Fed survey data showed one-year inflation expectations rose to 3.4% in March, with expected gasoline price growth jumping sharply.

Energy is where that pressure becomes immediate. Reuters reported on April 13 that Brent crude climbed back above $100 a barrel and U.S. crude moved above $102 after the latest Middle East escalation. Another Reuters report the same day said physical oil for immediate delivery to Europe was trading near $150 a barrel. Even if futures retrace, this kind of move raises the floor under shipping, fuel, chemicals, and power-intensive activity.

That matters because this is not a cheap-money earnings season. Reuters reported on April 13 that investors have started questioning earlier assumptions about Fed cuts, with some of the market now bracing for policy to stay tighter for longer if inflation pressure keeps building. When costs rise, and rate relief gets pushed back, “good” results have to do more work.

This is where the tape gets interesting. The same mega-cap firms doing so much of the earnings heavy lifting are also among the biggest spenders on AI infrastructure, chips, and power. Reuters noted in February that major U.S. utilities are expanding spending plans to meet data-center demand. Reuters also reported on April 9 that Amazon expects roughly $200 billion of capital spending in 2026, mostly tied to AI infrastructure.

Observation: Wall Street still expects strong profit growth, and the market is giving that view room to breathe. Observation: inflation re-accelerated in March, oil has jumped back above $100, and the earnings engine remains unusually concentrated. Those are all visible, checkable conditions.

The inference is more cautious. If leadership is narrow and input costs are rising, the margin cushion may be thinner than the headline estimate suggests. A company can beat earnings and still fail to satisfy a market that already priced in strength. That pattern showed up on April 13 when Goldman Sachs reported higher profit and record equities revenue, yet its shares fell as investors focused on weaker fixed-income trading and the already high bar for surprise.