Wall Street earnings season begins this week

• Wall Street earnings season begins this week
• S&P 500 earnings seen growing  8.8% YoY
• S&P 500 sales seen growing 4.6% YoY
• Downward revisions to earnings and sales estimates during the quarter
• Reports from Wells Fargo, Citigroup and JPMorgan this week
• S&P 500 and Nasdaq-100 at all-time highs

Wall Street earnings season for the second quarter of 2024 begins this week. As usual, major US banks will be the first to report with results from JPMorgan, Wells Fargo and Citi being scheduled for this Friday. How did markets and the economy performed in Q2 2024? What are analysts expecting from the upcoming earnings season, with major Wall Street indices at or near all-time highs? Let's have a quick look at market expectations.

How was Q2 2024 for markets and the economy?

While we have not been offered US Q2 GDP report yet and we will not get one for some time, monthly data released for the April-June 2024 period offer us some hints. Housing market activity moderate further as mortgage rates hold firm at elevated levels. Retail sales have been little changed in April and May. Regional indicators weakened. Meanwhile, labor market remained firm, with NFP reports showing an average monthly employment increase of 217-218k in Q2 2024.

Weakish retail sales data suggest that persistent inflation as well as high interest rates continue to negatively impact consumer, and this will be one of the themes to watch in earnings reports from US companies. Hints of deteriorating macro environment in the remaining quarters of 2024 may put pressure on shares. However, some indicators, like for example manufacturing ISM index suggest that we may be past the inflection point in earnings growth.

US ISM data suggests that we may be past inflection point in 12-month trailing EPS growth. Source: Bloomberg Finance LP, XTB Research

Markets launched the second quarter of 2024 on a weaker footing, with major Wall Street indices taking a hit in April. However, S&P 500 and Nasdaq managed to recover from those losses later on and climb to fresh all-time highs, gaining 3.92% and 8.26% in April-June period, respectively. On the other hand, Dow Jones and small-cap Russell 2000 failed to recover from April's sell-off and finished the quarter with 1.17% and 3.62% drop, respectively.

S&P 500 price performance also suggests that a period of strong earnings growth may be ahead. Source: Bloomberg Finance LP, XTB Research

What are expectations for the earnings season?

Current Wall Street expectations are for an 8.8% year-over-year growth in S&P 500 earnings, as well as 4.6% year-over-year growth in revenue. Both earnings and revenue growth expectations have weakened throughout the quarter as analysts saw an 9.1% YoY earnings growth and 4.7% YoY revenue growth in Q2 2024 at the end of March 2024.

Such an earnings growth would be weaker than 5-year average (9.5%), but slightly higher than 10-year average (8.4% YoY). However, it would also be the highest pace of growth since Q1 2022, when earnings grew by 9.4%, and would mark the fourth quarter of positive earnings growth in a row. Largest growth in earnings is expected in Communication Services and Health Care sectors. Meanwhile, Material sector is expected to experience deep drop.

When it comes to revenue expectations, if they are met it would also be weaker than 5-year average (6.9%), but also weaker than 10-yeara average (5.0%). Meeting a 4.6% YoY forecast would result in the 15th consecutive quarter of positive revenue growth for the index. Information Technology and Energy sectors are expected to report the highest revenue growth, while Material is the only sector expected to report lower sales than in a year ago quarter (Q2 2023).

Source: FactSet, XTB Research

Big banks dominate this week's earnings calendar

As we have already mentioned in the opening paragraph, this week's calendar will be dominated by reports from major US banks. However, there will be also some other, non-financial companies reporting results this week, like for example PepsiCo or Delta Airlines. 

Thursday

• PepsiCo (PEP.US) - before market open
• Delta Airlines (DAL.US) - before market open

Friday

• JPMorgan (JPM.US) - before market open
• Wells Fargo (WFC.US) - before market open
• Citigroup (C.US) - before market open
• Bank of New York Mellon (BNY.US) - before market open
• Fastenal (FAST.US) - before market open

Earnings stream will get more diverse with each week. Among next week's highlights, one can find Netflix or Johnson & Johnson.

S&P 500 futures (US500) halted recent upward move in the 5,640 pts area and began to trade sideways in 5,630-5,640 pts range. However, another attempt at breaking above the 5,640 pts zone can be observed at press time. Should buyers succeed, a test of the intraday all-time high near 5,645.2 pts may come next. Source: xStation5