Tesla And Alphabet Set The Tone For A Pivotal S&P 500 Earnings Week

Earnings Season At A Glance

According to FactSet, 88% of S&P 500 companies report earnings above consensus estimates, with 10% having released results.

Where Earnings Estimates Stand

Companies reporting and combining actual results with consensus estimates for companies yet to report, the S&P 500’s blended earnings growth rate for the quarter is 24.7% year over year, above the 23.3% expectation at the end of the quarter. Notably, the expected earnings growth rate for calendar year 2026 is 24.5%, while the estimated growth for 2027 is 17.5%.

How Markets Performed Last Week

The S&P 500 fell 1.5% last week amid weakness in memory chip companies, such as Micron Technology, which fell 13.3%, and a escalation in the Iran conflict. The Magnificent 7, consisting of Microsoft (MSFT), Meta Platforms (META), Amazon.com (AMZN), Apple (AAPL), Nvidia (NVDA), Alphabet (GOOGL), and Tesla (TSLA), declined by 1.1%. Small-cap stocks outperformed the S&P 500, while energy stocks rose.

Why The Magnificent 7 Still Matter

Because technology companies drive earnings growth and account for a significant percentage of the S&P 500’s market capitalization, the Magnificent 7 remains the group to watch this earnings season.

Notably, earnings from the Magnificent 7 are expected to soar 31.1% year over year, while the S&P 500’s earnings growth is running at 24.7%. Another key driver of earnings growth this quarter is Micron Technology (MU), whose stock has soared as demand from AI has sent earnings sharply higher. If the earnings from two of the major chip suppliers to AI, Nvidia and Micron Technology, are excluded, the expected S&P 500 earnings growth would be lowered to 16.8%.

Two of the Magnificent 7 are scheduled to report results this week: Tesla (TSLA) and Alphabet (GOOGL), after the close on Wednesday.

Financials Lift Sector-Level Earnings

Better-than-expected earnings reports within the financial sector drove the increase in expected earnings for the quarter.

Positive earnings reports from JPMorgan Chase (JPM), Goldman Sachs (GS), Travelers Companies (TRV), Wells Fargo (WFC), Morgan Stanley (MS), Citigroup (C), and Bank of America (BAC) contributed most to improved earnings for the week.

Revenue Trends Across Sectors

Better-than-expected sales growth in the financial sector contributed most to expected revenue growth, with expectations now above the end-of-quarter level, according to FactSet.

What Investors Should Watch This Week

The status of hostilities with Iran and oil prices will likely remain a focus for financial markets this week. Hostilities have escalated again, sending oil prices higher and helping the energy sector outperform, but a return to higher oil prices may weigh on overall sentiment.

Earnings will share the stage with geopolitics as the week’s main event. With the first busy week of earnings beginning, including Alphabet (GOOGL) and Tesla (TSLA), investors will begin to get a better sense of the broad strength of earnings growth. Further, given the reignited armed conflict with Iran and high oil prices, management’s forward earnings guidance will be closely watched. Alphabet is particularly noteworthy, as investors will be keen to gauge the AI monetization and spending cycle.