The S&P 500 is maintaining its bullish momentum, growing by 1.46% over the past week. However, despite the market’s resurgence, a group of investors remains concerned about the lofty valuations at which companies are trading today, accompanied by slowing economic growth. Barry Bannister, the chief US equity strategist at Stifel has a year-end price target of 5,500 on the S&P 500, representing a 12.8% downside from current levels. While such a scenario seems unlikely, investors need to pay heed.
Global headlines added to the mix of caution and optimism. The IMF, in its latest External Sector Report, issued a warning about widening global imbalances. The U.S. current account deficit ballooned to $1.13 trillion in 2024, and the IMF downgraded global growth forecasts for 2025 to around 2.8%, citing trade disruptions and inflationary pressures. A revised outlook is expected later this month.
On the tariff front, investors are in a jubilant mood with President Trump reaching a tariff agreement with Japan on 15%, down from 25% Trump had threatened earlier this month. As a part of the agreement, Japan will invest $550 billion in the US. An agreement has also been reached with the EU on 15% tariffs after a private meeting on Sunday between US President Donald Trump and European Commission President Ursula von der Leyen in Scotland. Deals with the Philippines and Indonesia have also been signed.
Riding on the market highs, meme stocks appear to be back in action. A new batch dubbed “DORK”, Krispy Kreme (D), Opendoor (O), Rocket Cos. (R), and Kohl’s (K), saw massive retail investor interest, driven largely by Reddit-fueled momentum. Many of these stocks have increased in value by more than 50% over the past month. The speculative frenzy is reminiscent of the volatility seen during the GameStop era, and although fundamentals remain unchanged, the market behavior has drawn widespread attention.
Back in Washington, the upcoming Federal Reserve meeting remains a focal point. The central bank is expected to keep interest rates unchanged, delaying any potential rate cuts until the latter part of the year once inflation is under control.
President Trump recently visited the Federal Reserve’s Washington headquarters, alongside Fed Chair Jerome Powell, to review the central bank’s $2.5 billion renovation budget. During the visit, a public disagreement emerged as Trump claimed the project’s cost had ballooned to $3.1 billion. Powell calmly corrected him, clarifying that the higher figure mistakenly included a separate building that had been completed five years earlier. The exchange, though civil, underscored the ongoing tensions between the two leaders.
Weekly Earnings Roundup: Surprises & Misses
Several major companies released their earnings last week, including Verizon (NYSE: VZ), Domino’s Pizza (NASDAQ: DPZ), SAP (NYSE: SAP), Coca-Cola (NYSE: KO), Texas Instruments (NASDAQ: TXN), Lockheed Martin (NYSE: LMT), Alphabet (NASDAQ: GOOGL), Tesla (NASDAQ: TSLA), IBM (NYSE: IBM), ServiceNow (NYSE: NOW) and T-Mobile (NASDAQ: TMUS). Below is a quick look at some of the most notable names.
T-Mobile delivered a record-breaking Q2, with revenue rising 6.9% YoY and diluted EPS climbing 14.2%. The telecom giant added a substantial number of both prepaid and postpaid customers. CEO Mike Sievert declared it “the greatest Q2 for growth ever in T-Mobile’s storied history.”
IBM also posted strong numbers, with revenue up 8% YoY and operating EPS increasing by 15%. Its software segment, a key growth driver, rose 10% while Red Hat revenue jumped 14%. Despite the solid topline, shares declined 8% after software revenue came in slightly below consensus expectations.
Alphabet beat expectations, posting a 14% YoY revenue increase and a 22% jump in EPS. YouTube and Google Cloud led the way, with both divisions showing significant operating leverage.
Lockheed Martin disappointed with an 80% YoY drop in net income for Q2, largely due to $1.6 billion in program losses. Management slashed full-year guidance to a range of $21.70-$22 per share, well below the previous upwards guidance of $27.30.
Tesla also posted disappointing results, reporting a 12% decline in revenue and a 16% drop in GAAP net income. Weaker-than-expected EV demand and rising competition contributed to the miss, leaving analysts questioning the lofty valuations of the company.
Top Gainers
GoPro (NASDAQ: GPRO) was the week’s biggest winner, soaring by more than 50% on surging Reddit and meme-stock interest.
Top Losers
ASML (NASDAQ: ASML) continued its recent slide, falling 5% after executives warned of muted growth in 2026 amid ongoing global tariff concerns. Although Q2 results were solid, the guidance spooked long-term investors.
Intel (NASDAQ: INTC) plunged 12% as the company posted a loss and is still working on a plan to engineer a turnaround under the leadership of new CEO Lip-Bu Tan. The company also announced plans to lay off 15% of its workforce. Additionally, the company warned of exiting chip manufacturing if it fails to secure a major customer, concerning investors.
Upcoming Earnings: Key Stocks to Monitor
The current week includes earnings reports from some of the heavyweights in the industry, including the likes of Visa (NYSE: V), Procter & Gamble (NYSE: PG), Booking Holdings (NASDAQ: BKNG), AstraZeneca (NASDAQ: AZN), Microsoft (NASDAQ: MSFT), Meta Platforms (NASDAQ: META), Apple (NASDAQ: AAPL), Amazon (NASDAQ: AMZN), Mastercard (NYSE: MA), S&P Global (NYSE: SPGI), and Colgate-Palmolive (NYSE: CL).
As markets are at record highs, investors need to be cautious before investing, as many companies are trading at sky-high valuations. In the event of a market correction, these overvalued companies will likely be among the first to go down.