First-Quarter Earnings Driving Stocks to Record Highs

Nasdaq economists say the strong breadth and magnitude of U.S. Q1 earnings have underpinned recent record highs in major equity indexes despite geopolitical risks, higher energy prices and a ~40 bps rise in 10-year Treasury yields year-to-date. Forward earnings grew across market caps, with large-cap earnings outpacing price gains (compressing P/E ratios), and mid- and small-cap earnings also contributing meaningfully. AI “hyperscalers” (notably Amazon, Google, Microsoft and Oracle’s cohort) accounted for a large share of Nasdaq-100 and S&P 500 earnings growth; their heavy AI capex has so far been funded largely from free cash flow and leaves leverage manageable. Overall, the authors argue earnings-driven gains and multiple compression reduce bubble concerns and could justify further equity upside if earnings persist.