Investors enter a pivotal stretch of the earnings calendar searching for confirmation that corporate profits remain on a solid trajectory and for signs that the Middle East conflict and elevated energy costs are not yet undermining that outlook. First-quarter reporting begins in earnest next week with large U.S. banks delivering the earliest results.
Strong expectations for quarterly and annual profit gains have been a central support for bullish stock market narratives. Those forecasts largely held up even as the conflict involving Iran intensified over the past month, producing a sharp jump in oil prices.
"The reason the market still is so robust is because earnings estimates just keep moving higher. There’s yet to be any sort of negative impact on fundamentals from the war," said Nick Giorgi, chief equity strategist at Alpine Macro. "If you start to see actually a bit of a negative cascade from fundamentals, then all bets are off."
Markets were buoyed this week by a diplomatic development - a two-week ceasefire agreement between the United States and Iran following threats of a significant escalation from U.S. President Donald Trump - and optimism about a cooling of tensions helped limit downside pressure on equities. As of Friday, the S&P 500 had reclaimed nearly all of the ground it lost after the U.S. and Israel began strikes in late February, leaving the benchmark less than 1% lower over that interval.
Still, the specter of the war remains a dominant theme and market participants expect sensitivity to developments in the Middle East to persist into the upcoming week.
High expectations set a challenging baseline
Roughly 10% of S&P 500 companies are slated to report first-quarter results by next Friday, with a much larger wave of releases to follow in subsequent weeks. In addition to bank earnings, corporate reports next week include household names such as Netflix, Johnson & Johnson and PepsiCo.
Analyst estimates compiled by LSEG IBES as of Friday point to about a 14% year-over-year increase in S&P 500 earnings for the first quarter. If realized, that would mark a sixth consecutive quarter of double-digit earnings growth - the longest such streak since 2011, according to Mark Hackett, chief market strategist for Nationwide.
"It is somewhat of a high bar coming into the season," said Garrett Melson, portfolio strategist with Natixis Investment Managers Solutions.
Below the aggregate headline, forecasts diverge substantially across sectors. Technology is expected to be the principal driver of growth, with estimated earnings gains of more than 40%, while healthcare companies are forecast to see earnings decline by roughly 10%, based on the LSEG IBES data.
Oil, costs and consumer spending under the microscope
One of the central issues in the upcoming reports will be how companies are feeling the effects of a surge in oil prices. Higher crude costs have the potential to elevate operating expenses across multiple industries and to siphon discretionary spending from consumers.
Even after easing somewhat following the ceasefire, U.S. crude is up about 70% so far this year, a move that could feed through to corporate cost structures and household budgets if it persists.
Overall sentiment about full-year prospects has grown more optimistic in recent weeks. Current consensus forecasts call for S&P 500 earnings to rise by more than 19% in 2026, up from an expected 15% increase as of late February.
"You’re going to see whether or not those earnings estimates hold up for the future or whether they get marked down," said Brent Schutte, chief investment officer at Northwestern Mutual Wealth Management Company. "Company guidance becomes incredibly paramount."
Banks will provide an early read on economic activity
Investors expect bank results to offer a meaningful snapshot of the economy, particularly with respect to consumer spending and corporate borrowing. Goldman Sachs is scheduled to report on Monday, followed by JPMorgan, the nation’s largest bank, on Tuesday along with Wells Fargo and Citigroup. Additional bank reports will arrive later in the week.
Analysts say commentary from lenders on consumer behavior and loan demand will be especially valuable. "What they’re seeing for spending patterns is going to be pretty critical to get a sense on just how material is that kind of slowdown risk from a consumption perspective," Melson said.
Giorgi added that remarks on lending activity will be closely monitored given the more volatile geopolitical climate. "If banks say companies ... are looking past it, they still need to invest and they’re still taking out loans, that would be a positive signal," he said.
Inflation risks tied to prolonged oil shocks
Outside of corporate reports, market attention will also focus on a U.S. producer prices release that serves as an important gauge of inflationary pressures. Economists and investors will be watching for signs that higher energy costs are moving through producer and consumer prices.
Oil price shocks commonly take time to infiltrate production costs and consumer prices, which means a prolonged conflict could increase the likelihood of broader inflationary effects. "The longer this goes on ... the greater impact it potentially has on leaking into U.S. inflation," Schutte said.
As the earnings season commences, expectations are firm but the season poses a clear test: whether corporate guidance, bank commentary and incoming inflation data corroborate the current optimistic trajectory for profits or compel analysts and investors to reassess forecasts.