Rebounding Corporate Profits Fortify Stock Market Rally

By Karen Langley Close Karen Langley Nov. 8, 2020 5:30 am ET Big U.S. companies have trounced expectations this earnings season, potentially laying the foundation for the next leg of the stock market’s rally as investors look beyond the election.

The much-stronger-than-expected results, according to bullish investors, are evidence of a V-shaped recovery in the economy and could propel stocks out of a narrow trading range to new highs. The S&P 500 is up 8.6% this year and 2% below the record set in early September. Corporate earnings are the biggest driver of stocks over the long term, though in recent years, stock prices have climbed faster than profits. In the week ahead, investors will look to reports from McDonald’s Corp. , Walt Disney Co. DIS 0.39% and networking-equipment company Cisco Systems Inc. CSCO 0.81% for clues about the recovery.

The earnings picture brightened in part because of results from those companies and their peers Facebook Inc., FB -0.43% Microsoft Corp. MSFT 0.19% and Google’s parent, Alphabet Inc. GOOG -0.09% But the earnings beats are widespread, with 86% of reporting S&P 500 companies having exceeded estimates. Analysts have lifted third-quarter expectations for all 11 S&P 500 sectors.

On the other hand, estimates have improved only slightly for the hard-hit energy sector, which has been beset by low oil prices and a dramatic slump in demand. The sector is projected to record a quarterly loss, just slightly smaller than the one estimated a few weeks ago.

WSJ reports companies trouncing expectations for this earning season? Really Let’s put this to a test...I’m betting a dem-controlled market won’t break 2%...like when Soretoro & Biden were in office.

Unresolved.

Biden will be good for the market!

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