Earnings season hasn't been able to keep the stock market rally afloat over the past week.

After an aggressive rally to all-time highs to start the year, the S&P 500 (^GSPC) has tumbled in April as rising bond yields and slimmed expectations for Federal Reserve interest rate cuts have put a damper on investors' enthusiasm.

And given the significant rise in share price of some of the market rally's darlings, even strong earnings aren't moving the needle for stocks.

"The broader market is having digestion problems in and around this earnings season," Julian Emanuel, who leads Evercore ISI's equity, derivatives, and quantitative strategy, told Yahoo Finance.

This has broadly been seen across stock reactions in the day following the release of quarterly results for the 65 S&P 500 companies that have reported results so far this season. Stocks that top Wall Street's estimates have risen 0.8% in the next trading session, slightly lower than the 0.9% average seen over the last few years, per Emanuel's research.

Meanwhile, companies that disappoint on both metrics are taking a bigger hit than normal, with the average stock falling 5.8% in the next trading action, compared to the usual 3.1% decline seen over the past five years.

"Given these extended valuations [in the S&P 500], even good news may not be good news, particularly in these names that have run as far as they have," Emanuel said.

Emanuel highlighted the recent price action following JPMorgan's (JPM) results, which topped Wall Street's estimates for both revenue and earnings per share. But the stock — which had hit multiple record highs earlier this year — traded lower on the day of its earnings report as the company didn't boost its 2024 interest income guidance like analysts had hoped.

Citi US equity strategist Scott Chronert echoed Emanuel's sentiment following the price action.

"Markets have priced in a higher probability of the Goldilocks scenario playing out this year, introducing more downside risk to 'good but not good enough' news," Chronert wrote in a note to clients on the day JPMorgan reported earnings. "While very early, the first set of 1Q reports from the banks highlights this risk of guidance falling short of lofty implied growth expectations, even as the overall fundamental picture remains healthy."

A similar narrative played out Friday after Netflix (NFLX) topped Wall Street's earnings and revenue estimates, flexing earnings per share growth of more than 83% from the year prior. But investors appeared hung up on revenue guidance for the second quarter, which came in at $9.49 billion instead of $9.51 billion, among other factors. The stock, which had rallied more than 150% in the past 18 months, sold off more than 8% on Friday.

Evercore ISI analyst Mark Mahaney's top reason the stock traded lower after the report was simply "expectations were high, and this wasn’t a beat & raise [guidance] quarter."

This backdrop comes as one of the busiest weeks of S&P 500 financial releases in the quarter is set to greet investors. Meta (META), Microsoft (MSFT), and Alphabet (GOOGL, GOOG) will headline the week of earnings results, and all three face stiff comparisons. Meta is expected to grow earnings by more than 96%, per Bloomberg data. Meanwhile, analysts project Alphabet's earnings grew by more than 30% this quarter compared to last year. Microsoft is expected to see nearly 16% growth.

All three are part of the top 10 stocks in the S&P 500 by market cap, which Goldman Sachs noted on April 5 are expected to drive earnings growth for the index this quarter. The top 10 stocks in the S&P 500 — primarily the "Magnificent Seven" — are expected to see earnings grow by 32% in the first quarter. Meanwhile, the other 490 stocks are projected to produce an earnings decline of 4%.

Given the market's recent jitteriness around rising yields and the lack of hope around Fed rate cuts, the performance of these companies will be "pivotal" for the market's direction moving forward, SoFi head of investment strategy Liz Young wrote on X, formerly Twitter, on Friday.

Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.

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