Despite a sharp dip for markets to open trading last Monday amid peak growth concerns and mounting global Delta variant Covid cases, U.S. equities managed to rally back and push to new highs last week as investors turned their attention to strong corporate earnings results. For the week, the Dow Jones crossed the 35,000 milestone for the first time with a 1.1% gain. The S&P 500 and Nasdaq Composite notched returns of 2.0% and 2.8%, respectively, as tech stocks continued to enjoy a boost from sliding interest rates and uncertainty on the global economic growth outlook. Meanwhile, the 10-year Treasury yield dropped as low as 1.14% last Monday but recovered to 1.28% to close out the week.

The second quarter corporate earnings season has gotten off to a red hot start with revenue and earnings beats running at or just below record levels. To date, a quarter of S&P 500 constituents have reported results, with the index’s blended earnings growth rate rising to 75.7% compared to the depressed earnings from the pandemic lockdowns in the second quarter of 2020, according to FactSet. In aggregate, S&P 500 members have reported earnings 19% greater than consensus forecasts, though revenue results have beaten by a lower margin of 4% over expectations. Profit margins continue to look very healthy as well, though there has been increasing discussion of inflation and wage pressures on corporate earnings calls that investors will be monitoring as they assess the future outlook.

Following what is shaping up to be a blockbuster quarter for corporate earnings, markets are increasingly looking out and forming expectations on the outlook for 2022 as we transition from the robust initial economic recovery phase fueled by vaccine efforts and stimulus. Future growth expectations have moderated a bit in recent weeks given the uncertainty on resolution of labor and supply chain issues and the durability of demand as stimulus effects fade, with the rising delta variant further fogging the outlook. Though these moderating expectations have contributed to small bouts of volatility in equity markets in recent weeks, any dips have been short-lived given the environment of low fixed income yields and excess cash. Through the first half of the year, U.S. mutual funds and ETFs received a record $900 billion in net inflows, according to the Wall Street Journal.

Looking to the busy week ahead, this will be the peak week of second quarter corporate earnings season with 180 S&P 500 companies on the docket to report results, including the big tech companies Apple, Amazon, Microsoft, Alphabet, and Facebook. It will be a loaded economic data week as well with the first look at second quarter U.S. GDP growth (expected to come in at around +12.7% year-over-year) and updates on the health of the U.S. consumer. Last but not least, the Federal Reserve will have its July meeting this week, which investors will be listening closely to for further color on the timeline for tapering the central bank’s bond purchases.