85% of S&P 500 companies' earnings exceeded expectations, Wall Street welcomes the strongest earnings season in four years

According to media statistics on Wednesday, S&P 500 constituent stocks are delivering their strongest earnings season performance in four years. So far, about 85% of the companies that have reported third-quarter results have exceeded profit expectations, marking the highest ratio since 2021. This performance provides new support for U.S. stocks, which have cumulatively risen 15% this year but stagnated in October.

This ratio of earnings exceeding expectations is particularly impressive, as analysts had raised the profit forecast threshold before the earnings season. Strong corporate performance and ongoing investments in the artificial intelligence sector are offsetting threats from trade tensions and government shutdowns.

With the U.S. government shutdown causing a vacuum in the release of economic data, earnings surprises have become a potential source of market confidence. Marija Veitmane, head of equity research at State Street Global Markets, stated that while it is still too early to draw conclusions, large companies are optimistic about navigating current regulatory uncertainties and are confident in future investments and capital expenditures.

JP Morgan expects S&P 500 constituents to achieve approximately 12% double-digit earnings growth, higher than the market's general expectation of a 7.7% year-on-year increase.

Multi-Industry Companies Contribute Earnings Surprises

Currently, less than one-fifth of the market capitalization of S&P 500 companies have released earnings reports, but the disclosed data shows that U.S. corporate profits remain strong amid tariffs and economic uncertainty. According to data compiled by Bloomberg Industry Research, companies exceeding earnings expectations come from multiple sectors.

In the financial sector, both Citigroup and Morgan Stanley exceeded expectations; General Motors benefited from strong truck sales and some tariff relief, raising its profit guidance and seeing its stock price soar; Coca-Cola also exceeded expectations, as consumers continued to purchase the company's beverages in large quantities despite price increases.

The team of JP Morgan strategist Dubravko Lakos-Bujas noted in their report:

Supported by a strong artificial intelligence investment cycle, ongoing deficit spending, and resilient consumers, U.S. companies will continue to achieve excellent earnings growth.

Despite the strong performance, Morgan Stanley strategist Michael Wilson stated earlier this week that U.S. stocks still face unresolved risks such as trade tensions and a slowdown in earnings forecast downgrades, and investors should remain cautious in the short term