Seeing the forest for the trees

Briefing.com Summary:

*First quarter earnings reports continue to impress and have driven up the blended growth rate to nearly 28%.

*Oil prices are down again and so are Treasury yields, which has been a support for the equity futures trade.

*Jobless claims, productivity, and unit labor costs are in a pretty good spot.

We have heard often that trees don’t grow to the sky, but it sure feels like that is what is happening with the stock market right now. It just keeps going up, and up, and up to sky-high levels that equate to record highs. The semiconductor stocks have been the sequoias, evidenced by a Philadelphia Semiconductor Index that is up 8.3% this week, bringing its year-to-date gain to 62.0%.

That is remarkable, but it looks like a sapling move compared to South Korea’s Kospi, home to Samsung Electronics and SK Hynix, which is up 13.5% this week and 77.7% year-to-date.

Okay, maybe not a sapling, but one should get the point that there has been a lot of energy in the semiconductor stocks that has powered global equity markets to heights that were not envisioned when the Iran war started and energy costs spiked.

It could not have been better timing, however, for the first-quarter earnings reporting period, which has been like a Miracle-Gro application for the U.S. market. The latest data from FactSet shows a Q1 blended earnings growth rate of 27.8%, up from 12.5% on April 10. That strength has pushed up the CY26 growth estimate to 22% from 12.8% on December 31.

Dow component McDonald’s (MCD) has helped with that increase, having topped the Q1 EPS estimate by nine cents, but its beat is representative of the vast majority of companies that have reported results and have exceeded expectations. Just look at Briefing.com’s Earnings Results Calendar, and you will see it colored with mostly green figures that denote earnings beats.

There have been some disappointments, like Whirlpool (WHR) and Shake Shack (SHAK), but the market continues to see the forest for those trees, aided by a continued slide in oil prices (WTI -3.3% to $91.93/bbl), a welcome slide in Treasury yields, and resilience in the mega-cap stocks.

And let’s be frank. It continues to see price action that isn’t a pruning of the trees—at least not yet anyway.

Currently, the S&P 500 futures are up nine points and are trading 0.1% above fair value, the Nasdaq 100 futures are up 23 points and are trading 0.1% above fair value, and the Dow Jones Industrial Average futures are up 81 points and are trading 0.2% above fair value.

These are relatively tame indications that might perhaps be foreshadowing some deforestation, if you will, but they are also pretty good in an absolute sense given how tall the trees have grown since the end of March.

In the same vein, today’s economic data was also pretty good.

Initial jobless claims for the week ending May 2 increased by 10,000 to 200,000 (Briefing.com consensus: 205,000), while continuing jobless claims for the week ending April 25 decreased by 10,000 to 1.766 million.

The key takeaway from the report is its quiet disposition in the sense that it isn’t showing wide swings in either initial claims or continuing claims, which suggests some welcome steadiness in the labor market.

Separately, nonfarm business sector labor productivity increased 0.8% in the first quarter (Briefing.com consensus: 1.8%) following a downwardly revised 1.6% increase (from 1.8%) in the fourth quarter. Unit labor costs rose 2.3% (Briefing.com consensus: 2.7%) on the heels of an upwardly revised 4.6% increase (from 4.4%) in the fourth quarter.

The key takeaway from the report is that, while productivity undershot expectations, unit labor costs decelerated in a move that should placate inflation hawks at the Fed. That won’t change the prevailing belief that the Fed isn’t going to be cutting rates soon, but it will temper some of the budding fears about entertaining the idea of a rate hike.

The 2-yr note yield is down four basis points to 3.83%, and the 10-yr note yield is down four basis points to 4.32%.

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Originally Posted May 7, 2026 – Seeing the forest for the trees