Happy Monday, Bull Sheeters. Finance reporter Anne Sraders here, filling in for Bernhard, who is taking a well-deserved vacation in dreary old Italy. (Speaking of, congrats to Italy on their Euro Cup victory on Sunday. Despite England’s best efforts, it came Rome instead of home.)

Markets started off the week on a strong foot, with stocks in the U.S., Europe, and Asia all in the green. Crypto, however, didn’t fare as well, with Bitcoin and Ethereum trading lower. This week kicks off another earnings season in the U.S., and I dig into the numbers and estimates for the second quarter in today’s essay.

But for now, let’s check in on the market action today.

Markets update

Asia

• Asia was higher, with the Hang Seng up 0.6%, the Nikkei up over 2%, and the Shanghai Composite rising nearly 0.7%.
• Singapore is starting to ease more COVID-19 restrictions as it nears a 50% vaccination rate among its population.
• Chinese ride-hailing giant DiDi Global cautioned of an “adverse impact” to its China revenues after Chinese regulators forced the removal of 25 apps from mobile stores on the grounds the company had violated data security laws. Shares of the U.S.-listed company fell over 7%.

Europe

• The European bourses were higher, with the Stoxx Europe 600 up 0.7%, France’s CAC 40 up nearly 0.5%, and London’s FTSE (recovering from earlier losses) and the DAX in Germany both higher.
• Milan’s FTSE MIB index was up some 0.9% following Italy’s victory over England in the European Cup final.
• Facebook-owned messaging platform WhatsApp is in hot water with European consumer groups, having been hit with a complaint over its controversial privacy policy update.

U.S.

• U.S. stocks closed at record levels, with the S&P 500 up almost 0.4%, the Dow nearly 0.4% higher, and the tech-heavy Nasdaq up 0.2%, all posting records. The Dow closed just a few points away from the 35,000 mark.
• Investors will get another look at the inflation picture in the U.S. with CPI (consumer price index) data on Tuesday. In May, inflation registered its biggest monthly uptick since 2008.

Elsewhere

• Gold is down slightly, trading around $1,800.
• The dollar is up.
• Crude is down, with Brent trading around $75/barrel.
• Crypto is in the red once again, with Bitcoin trading under $33,000 as of Monday afternoon, while Ethereum and Dogecoin are also down.

***

Et tu, Q2?

Corporate earnings have gone gangbusters so far in 2021.

Companies in the S&P 500 had a stellar first quarter, posting the biggest earnings beat in history, according to Bank of America. As second quarter earnings kick off this week, the question on Wall Street’s lips is: Can Q2 keep up the pace?

According to the estimates, it’s looking pretty damn good.

“Consensus [second quarter earnings per share] has risen 7% over the past three months to $45.01 (+61% [year over year]), the biggest upward revision in history since Reg FD,” strategists at Bank of America noted, “but despite the big upward revision, consensus still implies the two-year growth rate (vs. the comparable quarter in 2019) moderating to just 9% vs. +25% in 1Q. Based on positive results from the early reporters and continued strength in economic data, we expect an 11% beat, or $50 (+79% [year over year] or +21% vs. 2Q19),” they wrote in a Sunday note. (In other words, BofA strategists are even more bullish than many on the Street.)

But there’s one caveat that’s important to remember: Those numbers will likely look especially strong in comparison to the year-ago depths of the pandemic.

In fact, Goldman Sachs analysts argue that “in part, S&P 500 EPS growth will benefit from base effects. One year ago, S&P 500 EPS fell by 32% as the pandemic sparked a sharp recession,” they wrote in a Friday note. They note “economic growth is the main driver of EPS growth and our economists forecast US GDP growth of 13% year/year in 2Q.”

Heading into Q2 reporting, BofA recommends owning stocks in the materials, industrials, and tech sectors ahead of earnings, while avoiding utilities and staples.

But what might juicy earnings actually mean for your portfolio?

Unfortunately, it’s not necessarily great news, according to the BofA strategists, and the market’s moves might be less impressive. The bank’s strategists write that “while quarterly earnings surprises and market returns have been correlated (32% since 1996), strong earnings don’t always translate to strong market returns. Historically, 60% of down quarters since 1996 (or 75% of down quarters ex-GFC) occurred in quarters with earnings beats.” In fact, Fortune has written about how stocks sometimes fall on earnings beats.

Indeed, analysts at LPL Financial argued in a Monday note that “at some point, the good news is fully expected and factored into stock prices. That means markets may not respond as well to the next piece of good news.” What’s more, they believe “the second quarter will almost certainly end up being the peak in earnings growth for this cycle,” the LPL analysts added.

Regardless, market watchers (including yours truly) are sure to be keeping a sharp eye on the reports. And one thing analysts from LPL to Bank of America suggest to pay attention to: inflation and its impact on wages.

On my earnings radar this week? The Big Four banks, of course. JPMorgan Chase reports Tuesday; Bank of America, Citigroup, and Wells Fargo all report Wednesday.

REMINDER: The submissions deadline for Fortune‘s 40 Under 40 list is next Monday, July 19. If you’ve got someone who fits the bill in mind, please fill out the submission form.

***

Anne Sraders
@AnneSraders
Anne.Sraders@Fortune.com

As always, you can write to bullsheet@fortune.com or reply to this email with suggestions and feedback.

Today's reads

Inflation and your ETFs. The big worry on the Street these days is inflation. And just like the broader market, inflation is going to have an impact on your ETFs, or exchange-traded funds, writes Fortune's Jessica Mathews. Read how, and which kind of stocks tend to perform better, here. 

Poor performer? Can you guess which asset is one of the worst-performing so far in 2021? Well, if you're looking at a risk-adjusted basis, it's Bitcoin, according to a recent Goldman Sachs report. Given the crypto's incredible volatility, it ranks near the bottom (but still above assets like gold and the 10-year Treasury) on the firm's ranking of assets based on their returns in light of how volatile they've been.

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Market candy

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