Investing.com -- US third-quarter earnings season is set to kick into gear this week, in what will be a test for a stock market trading near record highs and hovering around lofty valuations.
Major financial firms including JPMorgan Chase (NYSE:JPM), Wells Fargo and BlackRock (NYSE:BLK) all report on Friday.
Bank results offer an important view into the economy, including the strength of demand for loans. Investors will also be on the lookout for signs of whether the Federal Reserve’s large interest rate cut last month is already influencing the economy through rising auto sales or the purchase of other big-ticket items.
Other companies reporting results during the week include PepsiCo (NASDAQ:PEP) and Delta Air Lines (NYSE:DAL).
Bullish investors are hoping the results will justify increasingly rich valuations in the stock market. The S&P 500 is up 20% for the year so far and is trading near record highs despite recent volatility spurred by rising geopolitical tensions in the Middle East.
In a note to clients on Sunday, analysts at Evercore ISI argued that the latest quarterly earnings will be more focused on the macroeconomic picture, including the Middle East concerns, the looming presidential election in the US in November, and the possibility of additional stimulus measures from the Chinese government.
These topics "will continue to exaggerate the macro, and its very uncertain uncertainties, over micro this earnings season," the analysts said.
They added that they expect growth in third-quarter results to slow from a "torrid pace" clocked in the prior period, when income per share expanded by 11.3% -- its fastest rate in more than two years.
The Evercore ISI analysts are forecasting earnings per share growth to come in at 6.5% during the third quarter. Wall Street consensus estimates see the figure at 2.9%, Evercore ISI noted.
"Earnings strength is likely to come from [artificial intelligence]-exposed sectors Information Technology and Communication Services (both Outperform rated) as well as Defensives Health Care (Outperform) and Utilities (In Line)," the analysts said.
"Cyclically geared Energy (In Line) is most at risk. Broadly though, the support from the S&P 493 is likely to moderate in [the third quarter] (albeit still supportive) before improving in [the fourth quarter of 2024] and 2025."