Two the Point — Earnings Power Fueling Market Momentum

The Q4 earnings season continues to surpass expectations, with S&P 500 companies reporting above-average earnings and robust year-over-year growth. While macroeconomic data remains mixed, strong corporate earnings and resilient fundamentals support market momentum as investors assess valuations and the outlook for monetary policy.

Key Insights:

• 62% of S&P 500 companies have reported Q4 earnings, with 77% exceeding EPS estimates, above the 10-year average of 75%.
• The blended Q4 earnings growth rate stands at 16.4%, up from 11.8% at year-end, marking the highest YoY growth rate since 2021.
• Eight of eleven sectors are reporting YoY earnings growth, led by Financials, Communication Services, Consumer Discretionary, and Information Technology, while Energy remains the weakest.
• Revenue growth is more modest, with 63% of companies exceeding estimates, below the 5-year average of 69%, and blended Q4 revenue growth at 5.2%.
• Labor market data remains stable, with 4.0% unemployment and 143,000 new nonfarm payrolls, though hours worked declined to 34.1, a metric to monitor.
• The Fed is expected to remain in ‘wait-and-see’ mode, with rate cut expectations centered around mid-2025, contingent on economic data trends.