Here comes third-quarter earnings season. Booming profits could propel the S&P 500 to new heights
Third-quarter earnings season kicks off this week and as results roll in they should reveal what the market is eagerly anticipating: blockbuster profits.
TL;DR
- The S&P 500 is projected to experience nearly 30% year-over-year earnings growth in the third quarter.
- The tech sector is a critical driver, with estimated EPS growth of 65%, boosted by companies like Nvidia and Micron.
- Earnings growth is broadening beyond the 'Mag-7' companies, with other S&P 500 stocks forecast to deliver 27% growth.
- Mid-cap and small-cap stocks also show healthy profit growth projections.
- Rising bond yields present a potential headwind, but strong earnings growth is expected to outweigh these concerns.
- Market breadth is a concern, with a significant percentage of S&P 500 stocks trading below their 52-week highs.
- Investors should monitor big bank earnings for insights into the impact of higher rates on lending and market activity.
- Valuation measures suggest the S&P 500 may be expensive, potentially limiting long-term returns.