S&P 500 Earnings Outlook Hinges On Tech, Energy And The Fed

Earnings Estimates Summary

According to FactSet, the S&P 500’s blended earnings growth rate for the quarter is expected to be 23.3% year-over-year. Notably, the expected earnings growth rate for calendar year 2026 is 24.1%.

Market Performance

The S&P 500 rallied last week. In a change from the year-to-date trend, the Magnificent 7, consisting of Microsoft (MSFT), Meta Platforms (META), Amazon.com (AMZN), Apple (AAPL), NVIDIA (NVDA), Alphabet (GOOGL), and Tesla (TSLA), led the advance.

Earnings Insights By Sector

Earnings growth in the quarter is expected to be led by the energy sector, followed by the technology sector. Only the healthcare sector is expected to report a year-over-year earnings decline.

Magnificent 7

Despite losing its crown for fastest earnings growth to energy this quarter, technology companies are critical drivers of earnings growth and account for a significant percentage of the S&P 500’s market capitalization. The Magnificent 7 remains a good proxy for mega-cap technology to watch this earnings season.

Revenue Results By Sector

Year-over-year sales growth for the second quarter is expected to be led by the technology sector, followed by energy.

Oil prices remained elevated for most of the second quarter due to armed combat with Iran, so the significantly higher oil prices reflected in the elevated earnings and sales growth rates this quarter. If oil prices remain where they are today, after declining from their mid-May peak, the rapid earnings growth in the energy sector will be over in the third quarter.

Dollar Weakness

The US dollar weakened slightly relative to the same quarter in the previous year. On the margin, this should benefit companies’ international earnings. According to FactSet, 42% of S&P 500 sales are from international sources.

Goldman Sachs estimates that a 10% depreciation in the US dollar increases S&P 500 earnings per share by 2-3%. Furthermore, companies tend to have an easier time outperforming consensus sales growth estimates during periods of US dollar weakness. Notably, the technology sector has the highest international sales exposure of all the S&P 500 sectors.

What To Watch Next Week

The economic calendar is relatively quiet this week, but two S&P 500 companies are reporting second-quarter earnings: PepsiCo (PEP) and Delta Air Lines (DAL). To end last week, June nonfarm payroll jobs rose by 57k, below consensus estimates. The headline unemployment rate looked better, declining to 4.2%. While the headline jobs data was better than the details, it was a “good enough” report to keep the worst of the worries about the labor market at bay.

Markets are still pricing at least one Federal Reserve (Fed) rate hike late in 2026, but the mediocre jobs report last Thursday lowered the odds marginally.

Wednesday’s release of the Fed meeting minutes will be closely watched as investors and markets adjust to the new Fed Chair and weigh the odds of any rate hikes in 2026.