S&P 500 Earnings Expectations Surge Ahead of Earnings Season—Banks in the Spotlight
Wall Street faces a high-class problem: earnings expectations have been raised to historic highs, leaving no room for error. As Q2 reporting kicks off with big banks, the market’s focus has shifted from “can they grow” to “can they deliver.”
Q2 earnings season kicks off next week, with JPMorgan (JPM) and Goldman Sachs (GS) leading the charge. With S&P 500 profit expectations sharply revised higher, the market’s focus has shifted from “can they grow” to “can they deliver.”
- S&P 500 Q2 earnings are expected to grow 23.4% YoY, well above the 15.2% forecast at the start of the year.[Kitco]
- Q1 actual earnings growth hit 29.4%, far exceeding the 14.4% expected in early April.[Kitco]
- Since the start of 2026, the S&P 500 is up 9%, while forward earnings expectations have surged 21%.[Kitco]
- The S&P 500’s forward P/E has fallen from 22.2x at end-2025 to 20.1x.[Kitco]
- Tech sector Q2 earnings are expected to grow 65.5%, while energy—boosted by surging oil prices—is seen rising roughly 115%.[Kitco]
- KBW analysts favor money-center banks; Bank of America names IBM, Spotify, and others as buys ahead of earnings.[CNBC][CNBC]
As Q2 earnings season approaches, Wall Street faces a high-class problem: profit expectations have been pushed to historic highs, leaving any company that misses the mark vulnerable to a harsh market penalty. Reuters, citing LSEG IBES data, reports that S&P 500 Q2 earnings are expected to grow 23.4% YoY—well above the 15.2% forecast at the start of the year.[Reuters] As of the July 10, 2026 close, JPMorgan (JPM) traded at $336.47, up 0.30% from its prior close of $335.47. With U.S. markets closed for the weekend, the price reflects the last session’s close with no intraday change.
Profit Expectations Surge, Narrowing Room for Error
In Q1, actual S&P 500 earnings growth hit a stunning 29.4%, far above the 14.4% the market expected in early April.[Kitco] That outperformance prompted analysts to aggressively raise forecasts for subsequent quarters. Yet Yardeni Research warned in a note this week: “The risk is that Q1’s exceptionally strong results led analysts to raise their expectations too much for the remaining three quarters.”[Kitco]
Chris Fasciano, chief market strategist at Commonwealth Financial Network, said: “Rising earnings and expectations are good for investors—they do push markets higher.” But he added: “It certainly raises the bar.”[Kitco] Joe Mazzola, head of trading and derivatives strategy at Charles Schwab, also expects greater volatility this earnings season given the upward revisions.[Kitco]
AI Investment and Economic Resilience Drive Growth, Valuation Pressure Eases
The core driver of this earnings surge is massive corporate capex on AI infrastructure, which has boosted not only semiconductor companies but also a wide swath of tech, industrial, and other firms.[Kitco] At the same time, despite surging energy prices tied to the Iran conflict, consumer spending has remained resilient, underpinning economic growth.[Kitco]
Notably, earnings growth is outpacing stock price gains. According to LSEG Datastream, the S&P 500 has risen 9% since the start of 2026, while forward earnings expectations have surged 21%.[Kitco] Mark Hackett, chief market strategist at Nationwide, noted: “It’s very rare to see the market this strong, but earnings even stronger.”[Kitco] This trend has helped ease valuation concerns. The S&P 500’s forward P/E has fallen from 22.2x at end-2025 to 20.1x.[Kitco]
Banks Lead Off, Analysts Favor Money-Center Banks
Q2 earnings season officially kicks off next week, with JPMorgan (JPM) and Goldman Sachs (GS) among the first to report.[Kitco] KBW’s head of U.S. bank research, Chris McGratty, told CNBC that money-center banks are the place to be right now.[CNBC] Meanwhile, Bank of America released a bullish list ahead of earnings, naming IBM, Spotify, InterContinental Hotels Group (IHG), Grab, and Deutsche Bank as “buy” rated stocks.[CNBC]
BofA analyst Jessica Reif Ehrlich is optimistic about Spotify’s upcoming August earnings report, writing: “We believe Spotify’s Q2 results will reflect stable underlying trends in key performance indicators, with reported revenue growth accelerating as FX headwinds ease.”[CNBC]
Sector Divergence: Tech and Energy Lead
At the sector level, earnings growth is highly uneven. According to LSEG IBES, tech sector Q2 earnings are expected to grow 65.5%, while energy—boosted by surging oil prices—is seen rising roughly 115%.[Kitco] Nataliia Lipikhina, EMEA equity strategy head at J.P. Morgan Private Bank, noted that European banks and industrials stand to benefit most from the AI trade.[CNBC]
This week has already flashed some warning signs. Reuters reported that despite Samsung Electronics posting strong results, its shares were sold off amid semiconductor sector volatility.[Kitco] The dynamic underscores that in today’s high-expectation environment, even solid earnings can come under pressure if the market was hoping for more.
Sources
- Reuters — Higher bar for corporate profit growth poses challenge for US stock market rally
- Kitco — Higher bar for corporate profit growth poses challenge for US stock market rally
- CNBC — Money center banks are the place to be, says KBW's Chris McGratty ahead of Q2 bank earnings
- CNBC — Bank of America says these stocks are a buy heading into earnings
- CNBC — Europe's banks and industrials to benefit most from AI trade: JPM Private Bank
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