The Stock Market at Midyear: Big Gains Fueled by Earnings Growth
By Charles Rotblut, CFA
As we gear up to celebrate the U.S.’ 250th Fourth of July (aka the semiquincentennial), the S&P 500 index is coming off its best quarterly gain in six years. The large-cap index surged 15.2% in the second quarter of 2026. The S&P SmallCap 600 index performed even better, soaring 19.7%.
Year to date, the S&P 500 has set 24 new all-time highs. This puts 2026 among the top 20 years since World War II for record highs set during the first half of the year, according to CFRA Research chief investment strategist Sam Stovall.
What is notable about the market’s run is that there is earnings growth behind it. Only three of the 11 S&P 500 sectors failed to report double-digit growth in first-quarter 2026, according to LSEG I/B/E/S. Large-cap consumer staples companies gained 8.1%. The energy and healthcare sectors reported declines of 0.8% and 3.4%, respectively.
The earnings growth is being fueled by widening profit margins, as illustrated by the chart below from J.P. Morgan Asset Management’s Guide to the Markets. The gray shading in each column is the contribution of profit margins to growth.
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