Major earnings reports are due next week, but strong results may not be enough to quell market fears
The third quarter earnings season has only just started, and it’s expected to be strong, but investors are growing wary of the market. Around 70 S & P 500 companies are reporting next week. While that’s far from the busiest week of earnings, it will give investors a sampling of results from businesses across different sectors. Tesla reports results Wednesday , after having just unveiled its long-delayed “flying car” Roadster that was developed with SpaceX. The latest earnings from a group of consumer-oriented companies including Procter & Gamble and American Express are also slated for release. Some semiconductor companies — Lam Research and Texas Instruments — are due out with results. Social media giant Meta Platforms is also on deck . When all is said and done, the latest quarter is expected to have been another strong one. As of Friday morning, 85% of the 46 S & P 500 companies that have reported thus far have beaten expectations. And, the broad market index is on track to post a blended earnings growth rate of 29% — a strong rate that’s suspected to come in much higher by the end of the season. That would be a boon for equities, as traders hope the strength of corporate fundamentals will support what’s been a bifurcated market. For the moment, the Magnificent Seven companies are doing the heavy lifting in the indexes, while the average stock is struggling. On Wednesday of this week, small caps quietly fell into correction territory . “These conditions right now, where we have sort of a, some stocks are winning and some stocks are losing — it’s not a real healthy condition for the market,” said Bob Lang, chief options analyst at Explosive Options. But there are other reasons to be concerned. This week, Paul Tudor Jones said 2027 could be a really challenging year for the stock market, because of new equity supply from major tech IPOs and a ballooning U.S. fiscal deficit. Adding to the pressure is an environment of higher interest rates, with oil remaining elevated and the upward pressure in bond yields. Last night, traders listening to Federal Reserve Chairman Kevin Warsh speak at an IMF event in Bangkok came away with the notion that the central bank will keep rates steady at the end of this month. But rate expectations remain elevated also, according to fed funds futures pricing, with the potential for even two hikes coming by the end of December. There’s also the worry that there will soon be a deceleration in the artificial intelligence spending cycle, which is going to shape what parts of the market do better and worse. That’s part of the reason that the VanEck Semiconductor ETF (SMH) was down for a ninth straight day on Friday, a streak that hasn’t occurred since 2006. Earnings, also, appear to be peaking. While the S & P 500 is expected to post strong growth this season, most of it is driven by energy and tech. Without those two sectors, earnings for the rest of the S & P 500 are expected to have slowed to 7% in the third quarter from 12% in the second, according to Bank of America this week. The bull market turned four just this week, a milestone that historically suggests further gains ahead, even if they’re more muted. However, worries around rates, AI spending and the sustainability of strong earnings could pressure the stock market enough that a pullback of 5% may be on its way by the end of the year, Lang said. More importantly, those factors could also cloud the stock market outlook next year. “We’re not going to have these strong growth rates in revenue and earnings for stocks for forever,” Lang said. “We’re not going to grow 20% to 30% every quarter the rest of our days here. So, eventually things [are] going to slow down a little bit.” “And if the cost of money continues to be expensive, just continue to rise, then eventually it’s going to be a backlash for the rest of the economy,” he added. Week ahead calendar All times ET. Monday, Oct. 19 10:00 a.m. NAHB Housing Market Index (October) Earnings: W.R. Berkley , Steel Dynamics , Fifth Third Bancorp Tuesday, Oct. 20 8:15 a.m. ADP Weekly Employment change (10/03) 8:30 a.m. Housing Starts (September) 10:00 a.m. Pending Home Sales (September) Earnings: Capital One Financial , United Airlines , Netflix , Genuine Parts Company , MSCI , Halliburton , 3M , KeyCorp , Hasbro , General Motors , Equifax , Synchrony Financial , RTX , Philip Morris International , Northrop Grumman , GE Aerospace Wednesday, Oct. 21 Earnings: Crown Castle , International Business Machines , Lam Research , Texas Instruments , United Rentals , Tesla , Rollins , Southwest Airlines , Globe Life , CSX , Abbott Laboratories , Moody’s , Westinghouse Air Brake Technologies , Thermo Fisher Scientific , Elevance Health , Danaher , AT & T , Northern Trust , NextEra Energy , CME Group , Meta Platforms Thursday, Oct. 22 8:30 a.m. Initial Claims (10/17) 10:00 a.m. Leading Indicators (September) Earnings: Procter & Gamble , Nasdaq , Tractor Supply , Roper Technologies , CBRE Group , Valero Energy , PulteGroup , PG & E , Lockheed Martin , Huntington Bancshares , Quest Diagnostics , Comcast , Blackstone , Norfolk Southern Friday, Oct. 23 9:45 a.m. S & P Global PMI Manufacturing preliminary (October) 9:45 a.m. S & P Global PMI Services preliminary (October) 10:00 a.m. Michigan Sentiment final (October) Earnings: SLB , American Express
