Third-quarter earnings season commenced with consensus forecasts calling for approximately 30% year-over-year profit growth, according to FactSet data, marking an increase from the 27% estimate three months prior. The technology sector faced particular scrutiny, with analysts projecting 65% gains in tech profits, up from an estimated 57% growth in the previous quarter. Upward revisions for companies including Nvidia, Micron Technology, and Dell Technologies were cited as significant contributors to sector momentum.
Large financial institutions opened the earnings cycle, with JPMorgan Chase, Goldman Sachs, Citigroup, and Wells Fargo reporting. Market participants focused on how steeper interest rates were affecting loan growth, balance sheets, merger and acquisition activity, and the initial public offering pipeline. Financials had declined 5% since August 31 and were hovering near their 200-day moving average, a key technical level. Commentary from JPMorgan CEO Jamie Dimon was expected to move markets given his influence on investor sentiment.
Multiple investment firms maintained bullish outlooks on equities. Goldman Sachs shifted to an “overweight” stance on equities, citing supportive growth conditions and low recession risk. Stocks were trading at 19 times forward earnings, down from 21 times during the summer despite strengthened earnings growth. UBS forecasted the S&P 500 would reach 8,400 by June of the following year.
The technology sector, representing approximately 40% of the S&P 500, accounted for roughly one-third of estimated quarterly profits and drew significant analyst focus. Taiwan Semiconductor Manufacturing Company’s earnings report was anticipated to provide important signals regarding chip demand trends. However, market breadth remained constrained, with nearly 38% of the 504 S&P 500 stocks trading down 20% or more from their 52-week highs. Bank of America indicated that while expecting 32% earnings growth, it cautioned that healthy earnings beats had become routine and might prove insufficient to propel stocks higher on their own.
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