A great earnings season is likely around the corner. Will it matter to the market?
Wall Street is gearing up for a good earnings season, but there are other variables to keep in mind beyond the headline numbers. First-quarter earnings per share are expected to grow 12.3% year over year, above the 11.4% average seen going back to 2009, according to S & P Capital IQ. Still, investors are keeping an eye on market valuations and the economic impacts of the U.S.-Iran War. “We are expecting a strong earnings season this quarter in spite of the geopolitical tensions,” said Brian Mulberry, chief market strategist at Zacks Investment Management. The earliest first-quarter reports will be released next week. About 54% of S & P 500 companies issued positive earnings per share guidance heading into the quarter, which would mark the highest percentage since 2021, according to an analysis by John Butters, senior earnings analyst at FactSet. By comparison, the five-year and 10-year averages for such rates sat at 42% and 40%, respectively. The bottom-up earnings per share estimate sits nearly 3% higher than where it did at the end of last year, Trivariate Research founder Adam Parker said. The technology sector has largely driven the increase, he said. Growth scare? Despite these positive expectations, outside factors could throw some cold water on investor optimism as the reports are released. First, the spike in fuel prices due to the war has raised concern that corporate profits may be hurt as consumers pull back on spending to offset higher energy costs. Futures for Brent crude, a global benchmark, have surged more than 50% since the conflict began and have risen nearly 80% in 2026. @LCO.1 YTD mountain Brent, year-to-date “Overall, market forecasts embed some breadth, and strong growth, belying what is clearly a growth scare related to the Iran War,” Trivariate’s Parker wrote in a Sunday note to clients. Increased fuel prices can also lead to more robust earnings for the energy sector, according to David Wagner, head of equity at Aptus Capital Advisors. However, higher energy costs could lead to margin degradation at many companies and the reports could provide clarity about the impact, he said. “Many market bears worry that higher energy prices, caused by the Middle East conflict, will degrade earnings due to increased input costs,” Wagner said. “I don’t believe that’s true.” Investors also remain optimistic that the supply crunch caused by the Strait of Hormuz’s closure can be resolved sooner rather than later. President Donald Trump threatened to strike Iran’s power plants and bridges if the Strait did not reopen by Tuesday. “Rising oil prices is leading to a tightening of financial conditions, and the geopolitical risks are elevated,” said Todd Ahlsten, investing chief at Parnassus Investments. “But we hope and expect they will be resolved in weeks, not months.” Market leadership While all eyes have been on oil and energy since the war began, investors still see technology leading the way on earnings growth. More than half of the expected increase for the S & P 500 is due to the sector, according to Zacks’ Mulberry. What’s more, Parker noted that expectations for first-quarter earnings are down compared with the beginning of the year for every S & P 500 sector besides information technology. Plus, there’s the fact that the S & P 500’s forward price-to-earnings multiple is at 20.3 as of the end of March, according to Sam Stovall, CFRA’s chief investment strategist. That’s a 2.8% premium to the 10-year average, he said. The three major indexes staged a recovery rally on hopes that the Middle East conflict was winding down last week, ending a five-week losing streak. But the S & P 500 has still dropped more than 3% in 2026 as the war added to Wall Street’s economic anxiety. .SPX YTD mountain S & P 500 in 2026 However, between the upcoming earnings season and the recent batch of positive economic data, there’s reason to feel good about the path of the U.S. economy, Parker said. On top of that, he said that investors can become increasingly comfortable rotating back into stocks as the war plays out. “The bottom line is that we think the April earnings season and guidance of July is going to be reasonably robust,” Parker said. “We can’t be certain, but it does seem to us that ‘second derivative of war’ news is now positive, and on the margin, that makes us more bullish on risk-taking today than we were three months ago.”
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