BNY’s Bob Savage notes that Q1 S&P 500 earnings are strong but upside versus expectations is modest, with uneven Q2 and full‑year guidance. Sector leadership is concentrated in semiconductors, AI-linked names and parts of energy, while defense lags. Savage highlights that elevated dispersion, Oil volatility and geopolitical uncertainty could keep equity markets selective through the rest of the quarter.

Earnings strength meets selective leadership

"Equity earnings in Q1 to date are up 15% for the S&P 500. The two weeks of U.S. reporting show 84% EPS beats, but the earnings spread above expectations has been modest, below 2% and below long-term averages. Q2 and full-year outlooks are uneven."

"April’s rally has broadened equity gains in the U.S. and helped other regions, but the focus on energy sector shares, AI companies, and defense has been consistent. The energy sector saw the largest shift in earnings outlooks, from -12% to +1%, making the next two weeks of reports key for meeting expectations. The AI story has bifurcated between software and semiconductors, with the Philadelphia Semiconductor Index climbing to new historic highs."

"Looking ahead, the key variable for equity markets is whether oil volatility and geopolitical uncertainty begin to weigh more directly on forward estimates, valuation multiples, and risk appetite. Elevated dispersion suggests investors should expect a more selective and less forgiving market environment through the remainder of the quarter. If oil stabilizes and conflict risks ease, leadership could broaden further."

"If not, markets may continue to favor secular growth, pricing power, and balance-sheet resilience over pure macro or conflict-driven exposures."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)