The second week of fourth-quarter earnings season is underway with 31 S&P 500 companies scheduled to report results this week. Major corporations including 3M, Netflix, Johnson & Johnson, Procter & Gamble, and Intel are set to release their quarterly earnings, marking a pivotal moment for investors assessing corporate performance. According to FactSet, early results show 79% of S&P 500 companies reporting earnings above consensus estimates, though only 7% of companies have released results so far.
The reporting calendar expands beyond the financial sector this week, providing broader insights into economic health across multiple industries. Meanwhile, the S&P 500’s blended earnings growth rate for the quarter stands at 8.2% year-over-year, slightly below the 8.3% expectations recorded at the end of the quarter.
S&P 500 Earnings Show Resilience Despite Modest Market Decline
Market performance last week revealed a modest decline in the S&P 500, with notable underperformance from the Magnificent 7 tech giants. This group, consisting of Microsoft, Meta Platforms, Amazon, Apple, NVIDIA, Alphabet, and Tesla, failed to maintain their typical momentum. However, small-cap stocks have emerged as strong performers in 2025 after years of trailing larger counterparts.
The shift in market leadership reflects changing investor sentiment and potential reassessment of valuation levels. Additionally, the first members of the Magnificent 7 are scheduled to report results in the coming days, which could significantly influence overall market direction given their substantial weight in the index.
Technology Sector Remains Critical Driver
Technology companies continue to serve as critical drivers of earnings growth, accounting for a significant percentage of the S&P 500’s market capitalization. According to analysts, the Magnificent 7 remains the group to watch this earnings season due to their outsized impact on index performance. The sector’s importance extends beyond domestic operations, as technology companies maintain the highest international sales exposure among all S&P 500 sectors.
Expectations for calendar year 2026 point to a robust earnings growth rate of 14.9%, according to FactSet. This projection suggests continued confidence in corporate profitability despite economic uncertainties and recent market volatility.
Financial Sector Faces Mixed Results and Legislative Headwinds
The financial sector delivered positive earnings surprises last week, with most banks reporting better-than-expected results. Nevertheless, sector performance declined amid legislative concerns, particularly President Trump’s threat to cap credit card interest rates. While analysts assign low odds to such legislation passing through Congress, relatively full valuations present additional challenges for financial stocks.
In contrast, downward revisions in the energy and health care sectors offset financial sector gains. Mixed sales growth results in the financial sector left expected revenue growth unchanged, remaining equal to projections at quarter end, according to FactSet.
Currency Movements Provide Tailwind for International Earnings
The US dollar weakened relative to the same quarter in the previous year, creating favorable conditions for companies with international operations. According to FactSet, 42% of S&P 500 sales derive from international sources, making currency movements particularly significant for earnings results.
Goldman Sachs estimates that a 10% depreciation in the US dollar increases S&P 500 earnings per share by 2-3%. Furthermore, companies historically find it easier to outperform consensus sales growth estimates during periods of dollar weakness, potentially benefiting multinational corporations this earnings season.
Economic Data and Political Factors Add Complexity
Recent economic releases have provided mixed signals, though better-than-expected retail sales data suggests the US economy remains resilient. This development has lowered recession odds for 2026, according to Bloomberg data. However, ongoing softness in the labor market continues to warrant attention from investors and policymakers.
Political developments could impact markets during the holiday-shortened trading week. The Supreme Court’s upcoming ruling on tariffs, potential credit card rate caps, geopolitical tensions with Iran, and the investigation into Federal Reserve Chair Powell represent sources of uncertainty for investors.
Investors will continue monitoring corporate earnings reports and guidance throughout the week as economic data remains affected by aftershocks from the recent government shutdown. The pace and quality of earnings reports will likely determine near-term market direction as more companies across diverse sectors release their fourth-quarter results.
