Investors Pin Hopes on Earnings Season to Revive Faltering Stock Market Rally

The postelection stock rally has sputtered. Investors are looking to the coming earnings season to revive it.

- Krystal Hur

The Dow Jones Industrial Average has given up all of its gains since the presidential election, down 0.7% from Nov. 5. The Russell 2000 index of smaller stocks, thought to be one of the biggest potential beneficiaries of a second Donald Trump presidency, has fallen 10% from its recent high in late November.

A spate of hotter-than-expected economic data, including Friday's blockbuster jobs report, has spurred growing doubts about whether the Federal Reserve will cut interest rates this year. Government-bond yields have soared in response, putting pressure on stocks.

The central bank began bringing down interest rates from a two-decade high last fall but has signaled a more cautious approach going forward. Rate cuts tend to be a tailwind for stock prices because they stimulate economic growth and reduce the appeal of bonds.

Stocks won't be able to maintain their torrid rise of the past two years and are likely to face greater pressure ahead if yields keep rising, analysts warn.

The Dow industrials and broader S&P 500 are down about 1% in the early days of 2025, while the yield on the benchmark 10-year Treasury note settled Friday at 4.772%, its highest mark since November 2023.

With the Fed unlikely to cut rates as quickly as investors hoped, analysts say corporate earnings growth—historically one of the biggest drivers of stock gains—becomes even more critical to keeping the market afloat.