Big U.S. companies have trounced expectations this earnings season, potentially laying the foundation for the next leg of the stock market’s rally as investors look beyond the election.

With most of the companies in the S&P 500 reporting, analysts are projecting third-quarter profits fell 7.5% from a year earlier, according to FactSet. That is a sharp improvement from the 21% decline they forecast at the end of September.

The brightening earnings picture shows the speed at which many companies are recovering from the coronavirus-induced downturn, even as the pandemic continues to weigh on the broader economy. United Parcel Service Inc., Citigroup Inc. and Taco Bell parent Yum! Brands Inc. are among those that have reported results that handily beat projections.

“The market overall is getting more comfortable with the resilience of corporate America,” said Anik Sen, global head of equities at PineBridge Investments, which manages about $111.7 billion. “Not just because we have fiscal stimulus, not just because we have the Fed standing by, but the resilience of corporate America in terms of expectations.”

The much-stronger-than-expected results, according to bullish investors, are evidence of a V-shaped recovery in the economy and could propel stocks out of a narrow trading range to new highs. The S&P 500 is up 8.6% this year and 2% below the record set in early September.

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