The S&P 500 rose 0.54% as of writing to close at 6,976.44, ending just two points below its record closing high of 6,978.60 set last week. The benchmark index snapped a three-session losing streak as investors responded to fresh manufacturing data and renewed optimism around corporate earnings. Markets absorbed ongoing political noise, including a federal government shutdown, without major disruption. The index now sits within striking distance of a psychological milestone. Will buyers push it over the line? Chipmakers and AI Stocks Drive Gains Technology stocks led Monday’s advance, with artificial intelligence themes back in focus. Alphabet climbed 1.9% to a record high, while Amazon added 1.5% ahead of quarterly earnings reports later this week. Semiconductor names rallied sharply as demand expectations strengthened. SanDisk surged more than 15%, Advanced Micro Devices gained 4%, and Micron Technology jumped 5.5%. Investors returned to AI-linked plays after recent valuation concerns cooled enthusiasm. This rebound marked the S&P 500’s first gain in three sessions. Over time, AI stocks have had a massive bull market. Small Caps Outperform as Confidence Builds While megacaps grabbed headlines, small-cap stocks delivered the strongest relative performance. The Russell 2000 jumped about 1% on the session and has gained more than 6% so far in 2026. By comparison, the S&P 500 has risen roughly 2% over the same period. Market participants often view small-cap strength as a signal of confidence in domestic economic growth. As capital rotated into smaller companies, traders pointed to improving breadth beneath the surface of the rally. Earnings Strength Reshapes the Bull Market Corporate earnings continue to anchor the market’s advance. Analysts now expect S&P 500 companies to post nearly 11% earnings growth for the December quarter, up from about 7% estimates at the start of January, according to LSEG. Source: FactSet via X Over 80% of reporting companies have beaten forecasts so far. Strong revenue growth and margin discipline have supported equity prices even as valuations draw scrutiny. This earnings momentum has changed the tone of the rally. Investors now focus less on speculation and more on measurable performance. A Shift From Valuations to Profits Recent data suggests a structural change in how the bull market operates. As of late January, earnings growth has accounted for roughly 84% of total S&P 500 returns in the current cycle. In previous years, expanding price-to-earnings multiples drove a larger share of gains. That shift matters. It suggests profits, not optimism alone, fuel the climb. The narrative of an AI bubble has softened as balance sheets validate higher prices. Macro Backdrop Supports Risk Appetite Economic conditions have reinforced investor confidence. US GDP growth stands near 3.3%, inflation remains moderate, and productivity trends show improvement. Although a government shutdown has delayed key data releases, including the upcoming jobs report, markets have largely looked past the disruption. The Dow Jones Industrial Average rose 1.1% on Monday, while the Nasdaq Composite added 0.6%. Investors now await further clarity from economic data and the Federal Reserve’s next meeting. What Comes Next for the S&P 500? As earnings season continues, the S&P 500 sits at a crossroads. Strong profits, AI-driven growth, and resilient economic data support the upside. At the same time, record highs invite caution. Can earnings keep pace with rising expectations? For now, markets appear willing to test the new all-time high again.
