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Traders work on the floor of the New York Stock Exchange.<\/p>\n
(Bloomberg) — A record-setting surge in US stocks has traders approaching the start of corporate earnings season with elevated expectations and little patience for companies that don\u2019t meet the bar.<\/p>\n
Most Read from Bloomberg<\/p>\n
The S&P 500 is up 11% year-to-date, fueled in-part by a frenzy over artificial intelligence that has also driven rallies in stock markets the world over. Earnings estimates have risen in tandem: Analysts tracked by Bloomberg Intelligence expect profit growth of 7.4% for US stocks in the third quarter, up nearly two basis points since mid-August. Earnings for the MSCI All-Country World Index are seen hitting a record.<\/p>\n
With trade tensions once again soaring and worries of a tech-fueled bubble percolating beneath the surface, Corporate America will need to deliver strong results to justify the nearly 32% gain the S&P 500 has notched from its April low. Wall Street will also be looking for reassurance on a range of potentially thorny issues, from the durability of AI spending to how elevated tariffs are impacting companies\u2019 bottom lines.<\/p>\n
\u201cI think investors will be very unforgiving of any kind of a slip \u2014 whether it\u2019s a slip in earnings or a slip of the tongue when talking about expectations,\u201d said Sam Stovall, chief investment strategist at CFRA.<\/p>\n
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JPMorgan Chase & Co. and other big US banks are scheduled to kick off the third-quarter reporting cycle next week while the spotlight will fall on tech-focused megacaps later this month.<\/p>\n
Here\u2019s a look at five key themes to watch as the results roll in.<\/p>\n
Tariff Troubles<\/p>\n
After upending markets earlier this year, worries over global trade were again front and center on Friday, with President Donald Trump saying he would impose an additional 100% tariff on China and export controls on \u201cany and all critical software\u201d beginning November 1.<\/p>\n
Many on Wall Street are convinced that months of elevated tariffs are already taking a toll that will be seen in third-quarter earnings: Deutsche Bank AG, for example, said S&P 500 earnings growth would have been a percentage-point higher in the quarter without the effects of tariffs.<\/p>\n
And while investors gave companies a \u201chall pass\u201d on deferred tariff guidance in previous quarters, they are unlikely to be as generous this time around, said Eric Freedman, chief investment officer at US Bank.<\/p>\n
\u201cWe would expect there to be more both clarity from companies, but then also more responses from investors about what they\u2019re willing to tolerate,\u201d he said.<\/p>\n
Asian countries \u2014 which shipped more than $1.3 trillion of goods to the US last year \u2014 have been comparatively resilient to tariff hikes. However, some fund managers put that down to front-loading of exports in advance of the tariffs, and expect a greater impact after that process concludes.<\/p>\n
For European companies, a slate of downgrades to earnings estimates suggests analysts are already baking in the impact from tariffs, lowering the bar for those set to report in coming weeks. A Citigroup Inc. index shows projections have been reduced consistently since mid-March.<\/p>\n
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AI Spending<\/p>\n
Uncertainty over global trade hasn\u2019t stopped companies from pumping money into AI-investments, with a sunny outlook for AI spending helping boost tech stocks around the world. UBS expects global capital expenditures to grow by 67% this year alone, to $375 billion. Another measure, capex to sales, stands at its highest level in 25 years, according to strategists at Societe Generale.<\/p>\n
Signs that companies are pulling back on those outlays would undercut the case for the eye-watering rallies in a wide range of market darlings, from chipmakers like Nvidia Corp to the infrastructure and services firms that have thrived during the AI boom.<\/p>\n
From an investor perspective, a slowdown would \u201cbe like slamming on the brakes,\u201d said Mike O\u2019Rourke, chief market strategist at JonesTrading Institutional Services LLC. \u201cI would expect you\u2019ll see a lot of the names enter a real profit-taking mode.\u201d<\/p>\n
In Europe, industries critical to powering AI such as telecoms firms, power generators and grid operators could be among the biggest losers on a pullback in US spending. A custom basket created by Bloomberg that tracks 10 such names, including Siemens Energy AG and Orange SA, has rallied 24% this year.<\/p>\n
Meanwhile, Asian chipmakers such as Hua Hong Semiconductor Ltd. and Semiconductor Manufacturing International Corp. have surged this year, part of a broader AI-driven rally that has boosted the Hang Seng Tech Index some 40% in 2025. But valuation concerns have grown there as well, and investors will be looking for evidence that spending on AI is paying off in a material way.<\/p>\n
Societe GeneraleSource: Societe Generale <\/p>\n
Hirings, Firings<\/p>\n
Investors will also focus on what companies have to say regarding headcount, given that worries over a weakening labor market have proliferated at a time when the federal government is shut down and key employment data unavailable.<\/p>\n
Signs that companies are cutting workers at a rapid clip could feed traders fears hat US consumer spending will also weaken, affecting a range of retailers, restaurants and other stocks, said Ross Mayfield, investment strategist at Robert W Baird & Co.<\/p>\n
\u201cIf you see enough of those start to stack up, especially if we\u2019re still in the absence of any official data, then it\u2019s a signal that the labor market is weaker than expected,\u201d he said. \u201cIt\u2019s a narrow landing strip.\u201d<\/p>\n
King Dollar<\/p>\n
While the dollar rallied against most major currencies in the third quarter and stands near a two-month high, it\u2019s still lower from a year ago and far off its 2022 peak. That\u2019s been a tailwind for many US corporations \u2014 a soft dollar makes exporters\u2019 products more competitive and helps multinationals that need to convert their foreign profits into the US currency.<\/p>\n
The currency\u2019s weakness, combined with other factors including AI capital investment, could give \u201canother 5-7% upside to current consensus estimates and grow earnings at a low-teens pace in Q3,\u201d said Jeff Buchbinder, chief equity strategist at LPL Financial, in a recent report.<\/p>\n
European exporters, on the other hand, are likely to show another hit from currency headwinds this quarter thanks to a still-strong euro. While the currency has weakened slightly in recent weeks, the decline has come too late to be reflected in earnings reports, according to Susana Cruz, a strategist at Panmure Liberum.<\/p>\n
That could be an issue for earnings, as Stoxx 600 constituents generate about 60% of their sales internationally. Construction-related stocks, health care and technology are among the most exposed.<\/p>\n
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China Watch<\/p>\n
Investors are also watching companies in China for signs of how the world\u2019s second-largest economy is holding up in the face of the global trade war. Though China\u2019s benchmark CSI 300 stock index is up 17% year-to-date, profit expectations are lackluster, with earnings projected to rise just 3% in the third quarter, data compiled by Bloomberg show.<\/p>\n
The outlook could darken significantly if trade tensions with the US keep rising: Trump\u2019s planned trip to Asia and his meeting with Chinese President Xi Jinping are already in doubt, while both sides have recently moved to potentially curb flows of technology and materials between the countries.<\/p>\n
Still, some investors have been growing optimistic on the longer-tern corporate outlook. Goldman Sachs sees China\u2019s earnings downgrades slowing, helped by stronger factory activity numbers and a notable surge in industrial profits. Others have lauded the government\u2019s efforts to fight so-called involution \u2014 the destructive price wars amid domestic companies.<\/p>\n
\u201cEarnings may improve sequentially as the government cracks down on involution,\u201d said Vey-Sern Ling, managing director at Union Bancaire Privee. However, \u201cthe focus is on AI progress so investors may respond positively to outlook commentary even if earnings stay weak.\u201d<\/p>\n
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–With assistance from Michael Msika.<\/p>\n
Most Read from Bloomberg Businessweek<\/p>\n
\u00a92025 Bloomberg L.P.<\/p>\n","protected":false},"excerpt":{"rendered":"Traders work on the floor of the New York Stock Exchange. (Bloomberg) — A record-setting surge in US…\n","protected":false},"author":3,"featured_media":295007,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[21],"tags":[691,738,3638,74,150804,55964,40529,8709,42135,5005,1988,134,158,67,132,68],"class_list":{"0":"post-295006","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-artificial-intelligence","8":"tag-ai","9":"tag-artificial-intelligence","10":"tag-bloomberg","11":"tag-china","12":"tag-corporate-earnings-season","13":"tag-earnings-estimates","14":"tag-european-companies","15":"tag-investors","16":"tag-new-york-stock-exchange","17":"tag-president-donald-trump","18":"tag-semiconductor-manufacturing-international-corp","19":"tag-stock-markets","20":"tag-technology","21":"tag-united-states","22":"tag-unitedstates","23":"tag-us"},"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@us\/115356311426752044","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts\/295006","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/comments?post=295006"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts\/295006\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/media\/295007"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/media?parent=295006"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/categories?post=295006"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/tags?post=295006"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}