Analysis-Expected rise in US earnings could be balm for stocks after rough stretch
By Caroline Valetkevitch and Lewis Krauskopf
NEW YORK (Reuters) — A resilient economy and strong consumer demand are expected to fuel a slight rise in third-quarter U.S. earnings, which could throw a lifeline to a stock rally that has stumbled in recent months.
S&P 500 companies overall are expected to have increased earnings by 1.3% from a year ago, according to LSEG IBES. Though tepid, it would mark a pickup after three quarters of flat or declining profits.
Some investors believe that could boost a deflated U.S. stock market. The S&P 500 is down roughly 6% from its late-July highs, though still up about 12% year-to-date.
After a rough September for stocks, «we need some good news» from earnings season, said Matthew Miskin, co-chief investment strategist at John Hancock Investment Management.
«You've had a rate shock, you've had a confidence shock,» Miskin said. «The economy has held up okay, but you need to see it come through in the numbers to support equities.»
Inflation dampened company earnings in the first half, after consumer prices surged in 2022 to their highest levels in decades. Some market participants believe comparatively robust economic growth could make the third quarter a turning point.
Friday's monthly U.S. jobs report for September was the latest evidence of economic strength. Employment rose by the most in eight months, suggesting consumer demand could stay intact for now.
«The economy has remained relatively strong and companies — particularly the largest companies — were in a good position to pass on some price increases and keep margins fairly strong,» said Rick Meckler, partner at family investment office Cherry Lane Investments.
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