Insights 
VT 
Corporate earnings can inspire confidence, and Q1 2025 was no exception, at least on the surface. The S&P 500 reported a 12.8% year-over-year earnings increase, with 76% of companies surpassing EPS expectations. It marked the seventh consecutive quarter of earnings growth and the second straight quarter of double-digit gains. Still, despite these solid figures, caution is starting to creep in.
Roughly 72% of S&P 500 companies have reported so far, and results have exceeded expectations. Profit margins rose to 12.7% from 11.8% a year ago, and revenues posted an 18th consecutive quarter of growth, albeit at a slower pace of 4.8%, below the 5-year average of 7.0%. Standouts included Communication Services and Health Care, with companies like Meta, Alphabet, Microsoft, and Bristol Myers Squibb leading the charge.
Yet not all sectors shared in the success. Energy earnings slumped 14.4% year-over-year, dragged down by low oil prices. Industrials also underperformed, hurt by falling revenues. These weaker areas are significant, as they are most exposed to upcoming macroeconomic challenges.
What To Expect
Analyst sentiment for Q2 is becoming increasingly cautious. Since March 31, earnings expectations have been revised down by 2.4%—a steeper drop than the 5-year and 10-year averages of -1.8% and -1.6%, respectively. The downward shift reflects concerns over shrinking margins, waning demand, and the threat of renewed tariffs. Energy forecasts have been slashed by 14.8%, and Materials by 11.9%, with Industrials also facing pressure.
Only Utilities (+0.8%) and Communication Services (+1.4%) have seen positive revisions, underlining the fragility of growth prospects.
For now, full-year EPS is still projected to grow 9.5%, with Q2, Q3, and Q4 estimates sitting at 5.7%, 7.8%, and 7.1%, respectively. While this points to continued growth, the pace is clearly slowing, adding uncertainty to equity market stability.
Despite mixed guidance, the S&P 500 remains priced for optimism. Its forward P/E ratio is 20.2, which is above the 5-year average of 19.9 and the 10-year average of 18.3, indicating markets still expect resilience through 2025 and into 2026, where EPS growth is forecasted at 11.1%. However, this leaves the index vulnerable to disappointment, especially in sectors tied to global trade.
Analysts remain divided. About 56% have a Buy rating on S&P 500 companies, with Energy, Communication Services, and Technology drawing the most optimism, despite Energy’s weak results. Overall, price targets suggest a 17% upside, but that hinges on companies delivering in an increasingly challenging environment.
Traders should closely monitor the Energy sector, where oil price pressure and geopolitical factors remain key. Consumer-focused and manufacturing firms may also come under strain if tariffs rise and consumer sentiment weakens.
Market Movements This Week
Despite strong Q1 earnings, price action now offers important signals. Markets tend to move ahead of headlines, so technical levels could offer insight into upcoming shifts.
In currency markets, the US Dollar Index (USDX) has extended its climb from the 98.80 area. With current price action hovering near 100.60, we’re watching for a possible consolidation here. If support holds, the index could stretch further to test 102.00. The dollar’s strength adds pressure to risk assets and commodities alike, especially if investors start pricing in higher-for-longer rates or fresh tariff headwinds.
EUR/USD continues to drift lower, with price now pointing toward the 1.1200 support zone. Should it stabilise here, traders will look for direction into 1.0970 next. GBP/USD paints a similar picture, trading lower and approaching 1.3145 as its next key level. If dollar strength persists, these pairs could remain on the defensive for a while longer.
USD/JPY is on the move again, now pushing toward 146.60. If it holds above this level, the next target lies near 149.15. Price action in this pair mirrors broader yen weakness, potentially linked to Japan’s policy divergence and safe haven outflows. The Swiss franc is also weakening—USD/CHF has resumed its upward climb, with 0.8530 now in focus.
AUD/USD, meanwhile, is retesting the 0.6460 area. If price pops higher, bulls may be eyeing resistance near 0.6480 or 0.6520. On the downside, 0.6385 remains the key level to watch. NZD/USD is slightly more active, trading up from the 0.5910 zone. But to see any real momentum, price needs to break above the 0.5986 or 0.6000 levels. If sellers return instead, 0.5870 is the next likely test.
USD/CAD is bouncing off support at 1.3755, a level that’s now acted as a floor more than once. If price turns upward again, traders will be watching 1.3910 or 1.3945 for resistance. If the move doesn’t stick, 1.3710 could be the next magnet. Canadian dollar weakness often rides in tandem with lower oil prices, so the correlation remains in play.
Crude oil remains under pressure. West Texas Intermediate (USOil) continues to trend lower and is approaching the key 58.30 level. A pause or consolidation here could open the door for fresh bearish setups, with 53.00 as the next major downside target if momentum doesn’t stabilise. The decline in oil aligns closely with the earnings contraction seen in the Energy sector, adding further weight to that theme of weakness.
Gold has been quiet, hovering below $3300. If we see a consolidation pattern form, bearish setups could trigger below this level. Gold has struggled to hold higher ground lately, despite global uncertainty and softer central bank rhetoric. This suggests that traders may be rotating out of safe havens in favour of risk assets—or simply waiting for a clearer directional cue.
The S&P 500 climbed higher last week, rising above the 5610 level. This rally echoes the optimism we saw in Q1 earnings, but with forward earnings estimates being revised lower, we’re eyeing this move with a bit more scepticism. If price consolidates here, traders may watch for bullish action near 5490 before making a push toward 5775 or 5830. However, failure to hold the 5610 zone could unwind some of the recent gains quickly, especially if macro headwinds intensify.
Bitcoin keeps grinding higher and is now pressing against the 98,300 level. If this momentum holds, crypto bulls could drive price toward fresh highs. However, if we see a pullback, bullish price action at 94,510 or even 91,500 would be the key areas to reassess long positions. With risk appetite flickering on and off, Bitcoin is still acting as a bellwether for broader speculative sentiment.
Natural gas is sitting tight around the 3.50 mark. Consolidation here could set up for a bullish move if price finds strength at 3.30. But with summer demand still unclear and storage numbers in flux, traders may want to wait for a stronger signal before jumping in.
Key Events This Week
As earnings season wraps up, the spotlight shifts back to macro data and central banks—factors that could sway already fragile sentiment.
Monday, May 5: The US ISM Services PMI is expected to dip slightly to 50.2 from 50.8. A reading below 50 signals contraction. Weak services data could reignite fears of a broader slowdown.
Thursday, May 8: The Fed is expected to hold rates at 4.5%. The market will closely analyse Powell’s comments for any reference to tariffs or persistent inflation. The Bank of England, meanwhile, is forecast to cut rates by 25 basis points to 4.25% in response to weak UK growth. Dovish guidance could weigh on the pound further.
Friday, May 9: The US Non-Farm Payrolls report is projected at 129K, well below the previous 228K. With unemployment expected to hold at 4.2%, a significant miss could reinforce rate cut expectations.
While no single event may tip the scales, taken together, they could shift market direction, especially in vulnerable sectors. With volatility ticking higher, the most critical signals may lie not in the headlines but in the subtleties of tone, data revisions, and price response.
