Rebounding Corporate Profits Fortify Stock Market Rally


Large US companies have given expectations in this earnings season, potentially laying the foundation for the next phase of the stock market rally as investors go beyond elections.

As with most companies in the S&P 500 reporting, according to FactSet, analysts estimate third-quarter profit declined 7.5% from a year earlier. They are a sharp improvement from a 21% drop at the end of September.

The glowing earnings picture shows the pace at which many companies are recovering from coronovirus-induced recessions, even as the epidemic continues on the broader economy. United Parcel Service Inc., Citigroup Inc. and Taco Bell parent Yum! Brands Inc. is among those who reported results that beat estimates.

Anik Sen, global head of equities at Pinebridge Investment, said, “Overall, with the flexibility of Corporate America, the market is becoming more comfortable.” “Not just because we have fiscal stimulus, not just because we have the Fed standing, but corporate America’s resilience in terms of expectations.”

Very strong-to-expected results, according to fast investors, are evidence of a V-shaped recovery in the economy and can push stocks to new heights beyond a narrow trading range. The S&P 500 is down 8.6% this year and a record 2% in early September.

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