According to LSEG, there will be 35 SP 500 companies reporting this week, a lot of them from the financial sector. There will also be non-SP 500 companies reporting as well.
Some important points that came up in the earnings previews for this week here and here:
1.) Expected financial sector EPS growth for Q3 ’25 is starting at +14.25%: that’s a high bar for a sector that has averaged just 6% EPS growth since the easy monetary policy ended off COVID in Q1 ’22.
2.) Many of the bigger banks and brokers are facing very tough comp’s in Q4 ’24: In Q4 ’24, the financial sector EPS growth ended at +35.1%, the highest y-o-y print since 2021;
3.) First Brands is the first credit crack in the “private credit” boom, but analysts will be watching the personal credit results this week, with all of the big banks reporting. Credit card charge-offs and delinquencies rose in August when looking at credit card data from JPMorgan, Citigroup, and Bank of America, but it’s still not a pattern. Investors should also get September credit card data this week from the big banks. This data is all “pre gov’t shutdown” but it will be interesting if the data is being impacted by public sector job losses.
There has been a pullback in consumer credit recently, which is an economic release that doesn’t get much attention in the financial media, and a lot of his come from a reduction in revolving credit.
SP 500 data:
- The forward 4-quarter (FFQE) estimate this week fell one thin dime to $293.87, from $293.97 last week.
- The forward PE ended the week at 22.3x the forward estimate versus the 22.9x multiple last week
- With the Friday market drop of 2.5% for the SP 500 and 3.2% for the Nasdaq, the SP 500 earnings yield jumped to 4.48%, still too low in my opinion. Remember, the early April ’25 liberation day end-of-week high tick was 5.50%, and I’ll bet the mid-week EY at the lows was much higher.
Is Crude oil starting to crack ?
Having never owned an energy stock in the last 15 years, it was lucky to avoid the fracking mess in late 2014, through Q1 ’16, that saw crude oil decline from the $90’s in September ’14 and bottom at $28 in February ’16.
High-yield credit struggled this period since the high-yield bond market is (or was) heavily-weighted towards commodities and energy in particular (at least at that time).
What shocked me was that in September ’14, when the fracking supply was just starting to hit the market, energy’s market cap weight within the SP 500 was 14%. By early ’16, energy’s market cap had fallen to 4% of the SP 500’s total market value, and today, as of Friday, October 10, ’25, the energy sector’s market cap is just 2.8% of the SP 500’s total market value, per the LSEG data.
The energy sector has become almost completely irrelevant to the SP 500.
If you listened to Treasury Secretary Bissent in early April ’25 and thereafter, the Treasury Secretary was providing the meat to the President’s tweets storms and press conferences, and one thing the Treasury Secretary did note in the background of the tariff talk, and deficit reduction, was that the Administration wanted crude oil prices lower.
It’s taken 6 month, but the Trump Administration might get lower crude prices, and it seems to be all part – like the tariff trumpeting – of the overall strategy to reduce the budget deficit, and get interest rates lower, which will allow Treasury to issue debt for the deficit at lower interest costs.
A trusted technician sent over a chart of the USO (US OIL ETF) last week, and the downside support looks to kick in around $60. That would be a $10 drop in price, and might help the Fed accept the fact that they don’t have to live in a 3% inflation target world, as inflation works it’s way back down towards 2%, even for core inflation.
Summary / conclusion: If crude oil cracks, it might give the Fed a clearer conscience in terms of reducing the fed funds rate in future quarters, and give the Fed some leeway in terms of the 2% inflation target rule.
TheEconomist wrote an article this weekend on President Trump’s tariff policies and the President’s notion that the era of “free-trade is over” but what I suspect is sitting beneath all this is a desire to fix the record budget deficit, (the deficit was 7% of the US Treasury budget at the end of 2024), and part of that is to get Treasury interest rates lower since the US budget projections indicate that for the last half of this decade, the largest line item expense is interest on Treasury debt.
Financials this week should tell a favorable story about the US economy, BUT watch how the stocks trade following what should be very good earnings releases. Stocks that might gap up on the good earnings news and close lower on heavy volume, might require some further paring. I’m particularly worried about JPMorgan and Goldman’s Tuesday morning’s October 14th earnings results, which should be very strong. If the stocks fade that’s your tell.
This rare earth mineral kerfuffle that began Friday will hopefully get resolved quickly. ZeroHedge reported Saturday night that the Chinese Ministry apparently noted that “rare earth export controls do not amount to an export ban (and) eligible applications will continue to receive licenses”.
It appears both sides are toning down the rhetoric around rare earth minerals.
None of this is advice or a recommendation, but only an opinion. Past performance is no guarantee of future results. All SP 500 EPS and revenue estimates as well individual company estimates are sourced from LSEG.com. Readers should gauge their own comfort with portfolio volatility, and adjust accordingly. As Friday’s action demonstrated, markets that go one way for a long period can reverse course suddenly.