Q3 Earnings Are Coming

By Nicholas Jasinski |  Monday, October 11 Calm Before The Storm. Stock indexes kicked off the week with losses after giving up their morning gains. The S&P 500 had been up as much as 0.6% early in the day, but sank through the session to close down 0.7%. The Dow Jones Industrial Average likewise ended with a 0.7% loss and the Nasdaq Composite finished 0.6% below even. Growth stocks generally beat value today, but the declines were broad. Real estate and materials were the only sectors in the S&P 500 to eke out gains, ticking up about 0.1% and 0.03%, respectively. Oil markets were in focus again, as the U.S. price of a barrel of crude rose 1.5% today to settle around $80.50—the highest level since October 2014. Natural-gas prices likewise remain elevated, but they’re down from last week’s highs. Barron's Pierre Briançon has the latest on the surge in energy prices here. And Avi Salzman calls out eight stocks to play the trend here. For once, there was quiet out of Washington. Last week's debt ceiling deal is the most recent headline concerning investors. The bond market was closed today in observance of Columbus Day. And there wasn't much in the way of corporate news either, as Wall Street looks ahead to third-quarter earnings season, which kicks off later this week. It's set to be another period of strong revenue and earnings growth for most companies, thanks to continued economic reopening tailwinds and ample consumer demand—giving firms pricing power in the face of supply chain cost pressures. But don't forget that stock prices have soared over the past year in advance of the current rebound in profits. So, like in the past few quarters, investors are coming into earnings season with high expectations. And there will be plenty of focus on management teams' earnings call commentary. Investors will want to hear their thoughts about supply chains, labor shortages, the Delta-variant wave of Covid-19, and other topics of the day. Wall Street analysts' consensus estimate is for close-to 27% year-over-year S&P 500 earnings per share growth in the third quarter, according to data from Credit Suisse's Jonathan Golub. Needless to say, that's rapid growth, even if it would be down from the 88% rate in the second quarter—when the year-over-year comparisons were to the peak months of 2020's Covid-19 shutdown. Third-quarter S&P 500 revenues are forecast to surge about 14% from the year-ago period, per Golub. The fastest earnings and sales growth is seen coming from the cyclical sectors of the S&P 500, including energy and materials. But technology and healthcare companies are forecast to grow plenty fast as well. A rising economic tide lifts all boats. As usual, big banks are among the early reporters this earnings season. JPMorgan Chase will kick things off on Wednesday, followed by Bank of America, Citigroup, Morgan Stanley, and Wells Fargo all on Thursday, then Goldman Sachs on Friday. More on what to expect from that group below.