Bond market volatility and Fed direction continue to overshadow this quarter’s earnings season.
Despite strong earnings reports, the stock market has continued to struggle this week.
No doubt Federal Reserve Chair Jerome Powell's indication of a prolonged "higher for longer" stance on interest rates has contributed to the market's woes, and the past weeks have seen a bond-driven market, causing concerns.
While some companies benefit from AI and positive earnings (e.g., Netflix), the CBOE Volatility Index remains high, driven by macro factors like geopolitical risks and uncertain economic outlook.
Deutsche Bank's analysis anticipates a positive 3Q earnings season for the S&P 500, though. After a slight recession in 2022, earnings recovered substantially in the first two quarters of 2023. While the consensus suggests an ongoing earnings recession, Deutsche Bank expects solid macroeconomic growth to propel S&P 500 earnings to a 4.9% year-over-year increase and a third consecutive sequential quarterly rise. They foresee actual EPS beating the consensus by 4.3%.
Historically, earnings seasons have been favorable for equities, and given current market positioning, a stronger-than-average rally is anticipated, especially if concerns of an earnings recession ease.
Here’s a look at the first week of 3Q earnings season as we get set to head into another big week.