earnings preview<\/a>, the banks got the earnings season off to a strong start. According to FactSet, a robust 83% of S&P 500 companies are reporting earnings above the consensus estimates.<\/p>\nS&P 500 Earnings Season Summary<\/p>\n
Glenview Trust, FactSet, Bloomberg<\/p>\n
Earnings Estimates Summary<\/p>\n
Companies reporting and combining actual results with consensus estimates for companies yet to report, the S&P 500\u2019s blended earnings growth rate for the quarter is at 5.6% year-over-year, above the 4.9% expectations at the end of the quarter. Notably, the expected earnings growth rate for calendar year 2025 is 9.3%, and for 2026, the expectations are at 14.0%.<\/p>\n
S&P 500 Earnings Estimate Summary<\/p>\n
Glenview Trust, Bloomberg<\/p>\n
Market Performance<\/p>\n
The S&P 500 rose modestly last week. The Magnificent 7, consisting of Microsoft (MSFT), Meta Platforms (META), Amazon.com (AMZN), Apple (AAPL), NVIDIA (NVDA), Alphabet (GOOGL), and Tesla (TSLA), outperformed.<\/p>\n
Market Returns<\/p>\n
Glenview Trust, Bloomberg<\/p>\n
Magnificent 7<\/p>\n
Because these companies are critical drivers of earnings growth and a significant percentage of the S&P 500\u2019s market capitalization, the Magnificent 7 remains the group to watch this earnings season. According to FactSet, the Magnificent 7 should experience 14.1% year-over-year earnings growth for the quarter, compared to 3.4% for the other stocks in the S&P 500.<\/p>\n
The first of the Magnificent 7 is scheduled to report results this week, with Tesla (TSLA) and Alphabet (GOOGL) after the close on Wednesday. Tesla enters the week with low expectations, but Alphabet is expected to report robust earnings growth. The details for Alphabet will be necessary, as the stock has been held back by worries that artificial intelligence (AI) will disrupt their search business. While this disruption seems inevitable, the ability of Google to monetize AI-driven search will be crucial.<\/p>\n
Magnificent 7: Q2 Estimated Earnings Growth<\/p>\n
Glenview Trust, FactSet, Bloomberg
\nEarnings Insights By Sector<\/p>\n
Positive earnings surprises from the financial sector were the most significant contributor to the improved earnings picture. Better-than-expected earnings from JPMorgan Chase (JPM), Travelers Companies (TRV), Wells Fargo (WFC), Citigroup (C), and Goldman Sachs (GS) were the most significant contributors last week, according to FactSet.<\/p>\n
Earnings Growth Estimates By Sector<\/p>\n
Glenview Trust, FactSet<\/p>\n
Sales growth is closely tied to nominal GDP growth, which combines after-inflation economic growth (real GDP) with inflation. Following better-than-expected data last week, sales growth of 4.4% is ahead of the 4.2% year-over-year expectation at the end of the quarter. If the estimates of second quarter nominal year-over-year GDP growth of 4.7% are correct, there could be further upside to sales growth.<\/p>\n
Better sales results in the financial and healthcare sectors were the most significant driver of the improvement in expected revenue growth last week, according to FactSet.<\/p>\n
Sales Growth Estimates By Sector<\/p>\n
Glenview Trust, FactSet
\nDollar Weakness Versus Tariff Drag<\/p>\n
The US dollar weakened relative to the same quarter in the previous year. On the margin, this should benefit companies\u2019 international earnings. According to FactSet, 41% of S&P 500 sales are from international sources.<\/p>\n
Goldman Sachs estimates that a 10% depreciation in the US dollar increases S&P 500 earnings per share by 2-3%. Furthermore, companies tend to have an easier time outperforming consensus sales growth estimates during periods of US dollar weakness. Notably, the technology sector has the highest international sales exposure of all the S&P 500 sectors.<\/p>\n
US Dollar Weakness<\/p>\n
Glenview Trust, Bloomberg
\nWhat To Watch Next Week<\/p>\n
Earnings should be the main event next week. There are some economic releases scheduled, but all are likely second-tier barring a considerable surprise.<\/p>\n
The better-than-expected retail sales report last Thursday provided more evidence that the US economy remains resilient despite the tariff increases, which drove the betting odds of a 2025 recession even lower.<\/p>\n
Betting Odds Of 2025 US Recession<\/p>\n
Glenview Trust, Bloomberg<\/p>\n
Despite noting that he is unlikely to fire Federal Reserve Chair Powell, President Trump continues to pressure him and refuses to rule out the possibility if fraud is involved. This conflict has the potential to add market volatility, with betting markets indicating a 21% chance of Powell\u2019s removal.<\/p>\n
Betting Odds Of Fed Chair Powell’s Removal<\/p>\n
Glenview Trust, Bloomberg<\/p>\n
News about the administration\u2019s trade negotiations and new tariff announcements will continue to be a focus. Significant new tariffs are currently scheduled to take effect on August 1, unless an acceptable trade agreement is reached. The Financial Times reported that President Trump was considering tariffs of 15-20% on imports from the European Union, an increase from the current 10% baseline tariff.<\/p>\n
Disclosure: Glenview Trust holds many stocks mentioned in this article within its recommended investment strategies.<\/p>\n","protected":false},"excerpt":{"rendered":"Banks provided a strong start to the second quarter earnings season. During this busy earnings week, … More…\n","protected":false},"author":2,"featured_media":8422,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[12],"tags":[3986,64,63,10307,99,10309,113,10308,171,4846,4688,3122,5300],"class_list":{"0":"post-8421","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-markets","8":"tag-alphabet","9":"tag-au","10":"tag-australia","11":"tag-bank-earnings","12":"tag-business","13":"tag-fed-chair-powell","14":"tag-google","15":"tag-magnificent-7","16":"tag-markets","17":"tag-recession","18":"tag-tariffs","19":"tag-tesla","20":"tag-us-dollar"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/8421","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/comments?post=8421"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/8421\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media\/8422"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media?parent=8421"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/categories?post=8421"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/tags?post=8421"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
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