S&P 500 earnings growth driven by tech and energy sectors, says BofA

by@CNBC

Summary

In the current corporate earnings season, significant profits reported by tech and energy companies are overshadowing a concerning trend in overall market growth. While companies like JPMorgan Chase, Wells Fargo, and Goldman Sachs have released mixed Q3 results, FactSet data indicates that year-on-year S&P 500 earnings growth is nearing 30%, driven largely by the energy and tech sectors. Oil companies are thriving due to high oil prices resulting from geopolitical tensions, and the tech sector is benefiting from advancements in artificial intelligence. However, earnings growth outside these sectors is slowing, dropping from 12% in Q2 to an expected 7% in Q3, raising concerns that a failure to meet high growth expectations in tech and energy could pressure the broader market.

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$JPM$WFC$C$GS$UNH$SPY

Analysis

Citigroup: Citigroup is a global bank delivering consumer banking, credit cards, institutional clients group services, and wealth management. The firm topped earnings estimates but saw revenue barely above consensus in Q3. Wells Fargo: Wells Fargo is a large US bank providing consumer banking, lending, wealth management, and corporate services. Its Q3 results were mixed as part of the uneven start to the earnings period. UnitedHealth: UnitedHealth is a diversified healthcare company offering health insurance, benefits, and technology-enabled services through its Optum and UnitedHealthcare segments. The company topped estimates and raised its full-year profit outlook. Goldman Sachs: Goldman Sachs is a leading global investment bank focused on investment banking, markets, asset management, and consumer banking. It posted a significant beat on both top and bottom lines in the latest quarter. JPMorgan Chase: JPMorgan Chase is a major US financial institution offering commercial and investment banking, asset management, and consumer financial services. In this earnings season, the bank reported a rare bottom-line miss amid the start of corporate reporting. Savita Subramanian: Savita Subramanian is a strategist at BofA focused on equity and market strategy. She highlighted that S&P 500 earnings growth excluding tech and energy has slowed and noted risks from elevated expectations in those sectors. Sector Outlook: Oil companies are benefiting from elevated oil prices amid geopolitical tensions, while tech firms continue to gain from the artificial intelligence buildout. Growth Disparity: Earnings growth outside of tech and energy is slowing compared to prior quarters, raising concerns about broader market sustainability if high expectations in those sectors are not met. Earnings Concentration: The bulk of S&P 500 year-on-year earnings growth is expected to come from the energy and tech sectors.

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