Stock Market Momentum Stalls Despite Mag 7 Earnings Rise

U.S. stocks are trading near record highs as the second-quarter earnings season ramps up.

The Magnificent Seven have surged 27%, compared with an 11% gain for the rest of the benchmark.

But with valuations historically high and gains increasingly concentrated in tech, some investors are adopting a more cautious stance, Martin Baccardax reported for Barron’s Daily.

The S&P 500 has climbed around 19% over the past three months, hitting its 10th record high of the year this week.

Investors remain optimistic that strong corporate earnings, a resilient economy, and expected Federal Reserve rate cuts will counteract the effects of President Trump’s new tariffs.

According to data from WisdomTree, the rally has been largely powered by megacap tech stocks: the Magnificent Seven have surged 27%, compared with an 11% gain for the rest of the benchmark.

The Nasdaq Composite also hit its 12th record high of 2025 on Monday.

Still, several indicators suggest caution. Of the 59 companies that reported earnings by the close of trading, about 81% beat analysts’ forecasts, according to LSEG. But profit gains have outpaced revenue growth, indicating that much of the upside has come from a weaker U.S. dollar rather than stronger demand.

Lori Calvasina, head of U.S. equity strategy at RBC Capital Markets, sees signs that the “momentum trade”—a key driver of the spring rally—may be losing steam.

Bloomberg’s U.S. Pure Momentum factor index, which has closely tracked the S&P 500, has started to retreat.

“It’s worth noting that in recent drawdowns, the momentum factor has peaked ahead of the S&P 500—sometimes by a few days, sometimes by several weeks,” Calvasina noted.