Earnings reactions will be “be varied and violent for stocks, not an upside index catalyst,” Evercore ISI strategist Julian Emanuel wrote in a note, adding that the market was already “priced near perfection.”
The third-quarter season will pick up steam from Tuesday with reports from banks including JPMorgan Chase & Co and Citigroup. Early results show investors have lofty expectations.
Shares of Levi Strauss & Co sank 13% on Friday after the apparel maker’s upgraded earnings guidance still disappointed following a 42% rally in the stock this year. Tesla Inc shares also fell even as it reported record third-quarter vehicle deliveries when most analysts had anticipated a strong quarter. The electric-vehicle maker reports earnings for the period on Oct 22.
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US Profit Expectations Have Weakened | Earnings reactions will be "varied and violent," Evercore ISI strategists say
US stocks hit a record last week on optimism around artificial intelligence and a robust economy, before President Donald Trump’s tariff threats on China derailed sentiment. US futures on Monday pointed to a rebound after Trump signalled openness to a deal with Beijing.
RBC Capital Markets strategist Lori Calvasina said that the rate at which earnings beat estimates is likely to slow compared with the previous quarter as companies feel a bigger hit from tariffs. Analysts tracked by Bloomberg Intelligence expect profits to have risen 7.4%, the smallest increase in two years.
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“Earnings sentiment is at a critical juncture for the biggest market-cap names in the S&P 500,” Calvasina said.
Meanwhile, Morgan Stanley strategists noted that the deteriorating earnings revisions breadth was in line with weaker seasonal trends for October. “We see this as a temporary pause ahead of the next leg higher given our view that earnings expectations will improve further into 2026,” they wrote in a note.
