Here comes third-quarter earnings season. Booming profits could propel the S&P 500 to new heights — SkimNews
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- S&P 500 profits are projected to grow nearly 30% year-over-year in Q3, per FactSet consensus estimates, up from a 26.7% forecast on June 30.
- Tech sector earnings growth estimates have climbed to 65% from 57% since June 30, helped by upward revisions for Nvidia and Micron Technology, with tech accounting for 40% of the index.
- Earnings growth is broadening beyond the Magnificent Seven, with the other 493 S&P 500 stocks forecast to deliver 27% YoY gains versus 20% for the Mag-7, according to Russell Investments.
- UBS projects the S&P 500 will reach 8,400 by June 2026, with CIO Ulrike Hoffmann-Burchardi telling investors to stay positioned for market upside.
- Market breadth is deteriorating sharply — only about 20% of stocks were trading above their 50-day moving average at the end of September, down from 70% in midsummer, per Morgan Stanley, and nearly 38% of S&P 500 names sit 20% or more below their 52-week highs.
- Rising bond yields threaten the rally, as the 10-year Treasury yield hit a 24-year high above 5.36% (up from 4.75% in August), with core PCE inflation still at 3% in August.
- Big banks JPMorgan Chase, Goldman Sachs, Citigroup, and Wells Fargo all report on October 13, offering the first read on how higher rates are affecting lending, M&A, and the IPO pipeline.
Why it matters: Barclays strategists call 2025-27 the fastest three-year stretch of S&P 500 earnings growth in decades outside recessions, but Bank of America warns the index reads expensive on 17 of 20 valuation measures — implying just -3% annualized returns over the next decade. The combination of blockbuster Q3 prints expected this week and a 10-year yield above 5.36% sets up a direct test: can 30% earnings growth overpower stubbornly high rates before deteriorating breadth turns into a broader selloff.
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