Last week, stocks soared to record highs as traders embraced cooler inflation data. The Dow Jones Industrial Avereage surged above 40,000 for the first time ever while several other major indices posted fresh new highs as well.

With approximately 90% of S&P 500 companies having disclosed their first-quarter earnings, profits may be poised to expand by as much as 10% this year, barring no unexpected events. If so, this would far exceed analysts’ (and many corporate executives’) expectations and reiterates the fact that there is more to the markets narrative than meets the eye. In this era where every piece of data is seemingly scrutinized for its potential impact on Federal Reserve policy, corporate profits tends to get overlooked, but not in the past couple of weeks.

Markets began stabilizing on Monday as fears over escalating conflicts between Israel and Iran subsided and what appeared to be a short covering rally from technical levels ensued. Tuesday saw a further boost with positive earnings reports from a few of the core cyclical names, but the momentum slowed on Wednesday.

Stocks traded with a heavy tone again last week due to rising geopolitical risk, weaker than expected corporate guidance, poor tech sector performance, and strong economic data which effectively reduced the number of rate cuts investors are expecting to see out of the Federal Reserve.