S&P 500’s $8 trillion surge faces major test with this week’s earnings release
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The S&P 500’s $8 trillion rally faces a significant test this week as traders navigate economic uncertainty, uncertainty over interest rates and anxiety related to the upcoming election.
What Happened: The upcoming corporate earnings season is expected to be a key determinant of whether stocks can maintain their momentum.
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According to a report from Bloomberg, the S&P 500 index rose about 20% in 2024, adding more than $8 trillion in market capitalization. This large increase was primarily driven by expectations for accommodative monetary policy and favorable earnings forecasts.
However, analysts are now revising their third-quarter earnings forecasts. Quarterly profits for S&P 500 companies are expected to rise 4.7% from a year ago, down from the 7.9% expected in July, according to data from Bloomberg Intelligence.
Adam Parker, founder of Trivariate Research, emphasized the importance of this earnings season, telling the magazine: “We need hard data from companies.”
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Investors want to know whether companies are deferring spending, whether demand is slowing, and how customers are responding to geopolitical risk and macro uncertainty.
Major companies such as Delta Air Lines, JPMorgan Chase & Co. and Wells Fargo are scheduled to report earnings this week.
Despite the strong rally and above-average position heading into this earnings season, Binky Chadha, chief U.S. equities and global strategist at Deutsche Bank Securities, expects the market reaction to be subdued.
“We got a little too optimistic in our estimates, but we’ve now reduced them to more realistic levels,” said Ellen Hazen, chief market strategist at FL Putnam Investment Management.
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Why it matters: Investors face a number of challenges, including the upcoming U.S. presidential election, the Federal Reserve’s decision to cut interest rates, and escalating conflict in the Middle East raising inflation concerns.
But there is also a glimmer of hope. With the bar lowered for revenue forecasting, companies have a greater chance of exceeding expectations.
Bloomberg Intelligence suggests that a strengthening earnings cycle could continue to offset weak economic signals and tilt equity markets in a positive direction.
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This Article: S&P 500’s $8T Surge Faces Big Test in This Week’s Earnings Releases
