This week is the second busiest quarter of earnings season, with 124 S&P 500 companies scheduled to report. Several notable companies, including Pfizer (PFE), Yum! Brands (YUM), McDonald’s (MCD), Caterpillar (CVX), and Walt Disney (DIS), will release their quarterly earnings.
Berkshire Hathaway’s better-than-expected earnings on Saturday led by Warren Buffett’s continued net selling of stocks. The S&P 500’s blended earnings growth rate for the quarter is at 10.3% year-over-year, above expectations of 4.9%.
Despite this positive earnings picture, the S&P 500 retreated from all-time highs last week due to concerns over jobs, increased tariffs, and escalating tensions with Russia. The “Magnificent 7” – Microsoft (MSFT), Meta Platforms (META), Amazon.com (AMZN), Apple (AAPL), NVIDIA (NVDA), Alphabet (GOOGL), and Tesla (TSLA) – outperformed due to strong earnings from Microsoft and Meta Platforms.
The technology, consumer discretionary, and communication services sectors were the most significant contributors to improved earnings, according to FactSet. Sales growth of 5.0% is ahead of expectations of 4.2%.
However, the US economy’s underlying trend remains a concern. The first-quarter headline GDP understated the economy’s strength due to trade distortions, and final sales to private domestic purchasers slowed to a 1.2% pace in the first quarter.
The labor market also saw a softening, with below-consensus monthly nonfarm payrolls of 73,000 jobs and an unemployment rate that rose to 4.2%. The employment-to-population ratio among prime-age individuals is deteriorating, indicating a cooling labor market.
Markets are now pricing in an 87% chance of a September interest rate cut by the Federal Reserve due to the shockingly soft monthly jobs report. The odds will be closely watched for any reaction to Fedspeak next week.
Source: https://www.forbes.com/sites/bill_stone/2025/08/03/second-quarter-earnings-magnificent-7-outperform-growth-expectations