Credit fraud shakes regional banks, while Wall Street giants surge ahead—earnings season exposes a widening gap in resilience and risk.
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The third-quarter earnings season begins its third-busiest week, which includes an earnings report from one of the Magnificent 7. 88 S&P 500 companies are scheduled to report. Notable companies scheduled to release earnings include: Coca-Cola (KO), 3M (MMM), Netflix (NFLX), Tesla (TSLA), Intel (INTC), and Procter & Gamble (PG).
With relatively few companies reporting so far, 86% have beaten consensus earnings estimates.
S&P 500 Earnings Season
Glenview Trust, FactSet, Bloomberg
Earnings At A Glance
Combining actual results with consensus estimates for companies yet to report, the S&P 500’s blended earnings growth rate for the quarter is at 8.5% year-over-year, above the expectations of 7.9% at the end of the quarter. The expected earnings growth rate for calendar year 2025 is 11.0%, and for 2026, it is 13.9%.
S&P 500 Earnings Estimates
Glenview Trust, FactSet
Market Performance
A strong start to earnings season helped lift the S&P 500 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 last week.
Bank earnings were well above expectations, sending the expected year-over-year earnings growth rate for the financials sector to 18.2%. However, there was a scare after some smaller banks, Zions Bancorp (ZION) and Western Alliance Bancorp (WAL), reported loan fraud. Additionally, JPMorgan’s CEO, Jamie Dimon, warned of “cockroaches” in the credit market on his earnings conference call. The mega-banks, JPMorgan (JPM) and Goldman Sachs (GS), can offset small loan losses thanks to robust trading and investment banking revenues. Still, the smaller regional banks don’t have that luxury, causing the regional bank stock index to plunge while the large bank index is sharply higher for the year.
Market Returns
Glenview Trust, Bloomberg
Magnificent 7
Because these companies are critical drivers of earnings growth and a significant percentage of the S&P 500’s market capitalization, the Magnificent 7 remains the group to watch this earnings season. According to FactSet, the Magnificent 7 are expected to grow earnings by 14.9% year-over-year in the third quarter, while the other 493 companies in the S&P 500 should grow at 6.7%. The first of the Magnificent 7, Tesla (TSLA), is scheduled to report results this week.
Magnificent 7: Q3 Estimated Earnings Growth
Glenview Trust, FactSet, Bloomberg
Earnings Insights By Sector
According to FactSet data, the positive earnings surprises by Morgan Stanley (MS), Bank of America (BAC), JPMorgan Chase (JPM), Travelers Companies (TRV), Goldman Sachs (GS), and Wells Fargo (WFC) were the most significant contributors to the increase in the earnings growth rate for the S&P 500 last week. The blended earnings growth rate for the financials sector increased to 18.2% from 13.2%.
Earnings Growth By Sector
Glenview Trust, FactSet
The energy sector is expected to experience the most significant year-over-year earnings decline due to lower oil prices.
Energy Commodities
Glenview Trust, Bloomberg
Revenue Results By Sector
Sales growth is closely tied to nominal GDP growth, which combines after-inflation economic growth (real GDP) with inflation. If the third-quarter nominal year-over-year GDP growth estimate of 4.8% is correct, there could be downside to expected sales growth. At this early point in the earnings season, sales growth at 6.6% is above expectations.
GDP Growth Drives S&P 500 Sales
Glenview Trust, Bloomberg
Consistent with the earnings picture, energy-sector revenues should see the most significant year-over-year decline.
Sales Growth By Sector
Glenview Trust, FactSet
Dollar Weakens
The US dollar weakened relative to the same quarter last year. On the margin, this should benefit companies’ international earnings. According to FactSet, 41% of S&P 500 sales are from international sources.
US Dollar Weakens
Glenview Trust, Bloomberg
What To Watch This Week
With almost no US economic releases on the calendar due to the government shutdown, the focus will be on earnings. In addition to being the third-busiest week of earnings reports this season, the breadth of companies reporting is expanding further beyond the banks.
US Recession Betting Odds
Glenview Trust, Bloomberg
Despite the lack of government economic reports and the government shutdown, the economy is holding up just fine, with the betting odds of a US recession in 2025 falling to 5%. Economic and market sentiment was helped last week by President Trump indicating that the massive tariffs on China were unsustainable and Fed Chair Powell reinforcing the case for two more rate cuts this year.
As the earnings season heats up beyond the financials, earnings will be monitored closely. Given the additional economic visibility issues due to the government shutdown, forward earnings guidance from management will be even more closely watched.
