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Wall St Week Ahead: Industrial sector gains will be tested as earnings increase

The Industrial sector has been the leader for U.S. stocks during a turbulent year on Wall Street. But its strength will be put to the test as earnings season gets underway.

S&P 500 Industrials, which includes aerospace companies, electrical and machinery manufacturers, transportation companies and building products firms, has gained 15% in 2025. This is the best performance year-to date of all 11 S&P 500 sectors, and it's more than twice the index's overall gain.

The industrials sector will continue to be in the spotlight with a week full of earnings reports, including those from over one-fifth (50%) of the S&P 500. Alphabet, Tesla and other "Magnificent 7" tech and growth giants are the first to announce.

S&P 500 is up 26% since April as investors have shaken off fears of a recession that were sparked by President Donald Trump’s "Liberation Day tariff" announcement.

Chuck Carlson is the chief executive officer of Horizon Investment Services. He said that this earnings season was "especially important" because of the recent market rebound. "I'd think that this has created a good deal of optimism for earnings," said Chuck Carlson, chief executive officer at Horizon Investment Services.

Several industrials will also be in the spotlight for their earnings.

The sector has seen a boost in performance due to the increased geopolitical tensions between the Middle East, Ukraine and Germany.

S&P 500 aerospace & defense has risen 30% in the past year. Defense companies that will be reporting in the next week include RTX Lockheed Martin, and General Dynamics.

GE Aerospace's profit forecast for 2025 was raised on Thursday. The company's shares have risen by about 55% in the past year.

GE Vernova shares, a company that was spun off last year from the legacy General Electric, have soared over 70% in value this year. It is now the best performing industrial stock. The results of the power equipment manufacturer are due on Wednesday.

Robert Pavlik is a senior portfolio manager with Dakota Wealth Management. He said that the push for reshoring and the expansion of artificial intelligent, which have boosted demand for cooling systems, factory automation and other products, has supported several stocks in this industry.

Uber shares, which are up about 50% this year, have also been a major supporter of the industrial sector.

Nicholas Colas said, "Unlike many non Tech groups, this group has a number of solid stories that do not rely on macro-forces to deliver solid returns in the future," Colas wrote on Wednesday. Colas noted that large cap industrials are still attractive, despite their recent performance.

Industrials are a sector that has historically been closely linked to the economy. However, the performance of this sector has suffered due to a decline in cyclically-linked growth stocks.

Shares in package delivery companies UPS and FedEx are down sharply, and shares of airlines such as United Airlines and trucking firms like JB Hunt Transport Services have also been negative this year.

Walter Todd, Chief Investment Officer at Greenwood Capital, said that there are "economically sensitive" (areas) in industrials which are not performing well.

Honeywell, Union Pacific, and United Rentals are also scheduled to report this week.

Wall Street is focused on the trade situation, as well as earnings. The U.S. will be increasing tariffs against a number of trading partners on August 1.

Investors are also keenly interested in the news about the Federal Reserve. Fed chair Jerome Powell is under renewed pressure to resign from Trump, who wants the central bank's interest rates to be lowered. The Fed's next meeting on monetary policy is scheduled for July 29-30.

S&P 500 is up about 7% this year.

Eric Kuby said that the market showed resilience in spite of "a tremendous amount of uncertainty." Kuby is chief investment officer for North Star Investment Management Corp.

Kuby stated that "we continue to be amazed at how well the stocks are trading despite what appears to be a number of significant headwinds."

(source: Reuters)