Wall Street expects strong fourth-quarter earnings driven by robust US economy

• Nine of 11 S&P 500 sectors expected to show positive Q4 growth (up from 6 in Q3 and 2 in Q2), with industrials, financials, and cyclical value stocks showing improving earnings alongside tech
• The earnings gap between the 'Magnificent Seven' tech giants and broader market continues to narrow as profit growth broadens across industries
• Consumer discretionary sector expected to be the biggest laggard as cost-sensitive shoppers tighten spending amid economic pressures

Summary: Wall Street Anticipates Strong Q4 Earnings Amid Economic Resilience

Global brokerages project robust fourth-quarter earnings for Corporate America, with S&P 500 companies expected to post 8.8% year-over-year earnings growth, according to LSEG data. The strong performance is attributed to resilient U.S. economic conditions and Federal Reserve rate cuts that have bolstered corporate profit margins.

Key Sector Trends:

Technology companies are anticipated to lead earnings growth, driven by continued AI momentum. However, analysts highlight a broadening profit expansion beyond tech, with 9 of 11 S&P 500 sectors expected to show positive growth in Q4, up from 6 in Q3 and just 2 in Q2.

The earnings gap between the "Magnificent Seven" tech giants and the broader market is projected to narrow further. Value stocks—particularly industrials, financials, and other cyclical sectors—are expected to demonstrate improved earnings growth aligned with overall economic expansion.

Underperformers:

Consumer discretionary is identified as the weakest sector, as cost-conscious shoppers reduce spending amid economic pressures. Deutsche Bank and Citi analysts warn that sectors serving value-sensitive buyers may face headwinds.

Market Implications:

BlackRock Investment Institute strategists believe solid economic growth and supportive monetary policy will continue boosting stocks, reinforcing their overweight position on U.S. equities. The earnings season officially began Tuesday, with initial reports exceeding analyst expectations.

Ryan Detrick of Carson Group emphasized the shift from tech-dominated growth to broader market participation, suggesting cyclical value names will justify the ongoing economic expansion through stronger earnings performance.