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INVESTORS READY FOR US EARNINGS, WITH BANKS UP FIRST

Next week marks the start of the second-quarter earnings season for U.S. companies, and results from the big banks will lead the way.

JPMorgan Chase JPM.N and Goldman Sachs GS.N are among the banks due to report on Tuesday.

Investors have been optimistic that profit growth will be strong for the season after a much stronger-than-expected first-quarter reporting period for S&P 500 .SPX companies.

Some market watchers are worried companies will struggle to beat forecasts for strong earnings in the upcoming season, but others remain confident that companies will continue to beat Wall Street expectations.

"The bar is high, but we're not worried," Nicole Inui, head of equity strategy, Americas, for HSBC Global Investment Research, writes in a note this week.

"In an atypical move, earnings expectations increased ahead of the quarter, setting a higher bar for EPS beats," she writes. "Despite lofty expectations, we are not worried. Most of that EPS growth comes from a handful of sectors (energy, semis & tech hardware), where earnings visibility is high."

Moreover, she says while tech and AI-related earnings and spending will be the focus, areas outside of AI could surprise investors.

"Certain sectors (such as autos) booked tariff refunds in Q1, and there could be more from sectors such as consumer staples and industrials," she writes, adding that "with the FIFA World Cup underway, there could be some consumer bounce feed-through to the beverage and travel space."

For the second quarter that just ended, S&P 500 companies are expected to report aggregate earnings growth of 23.7% from a year ago, according to a note Friday from LSEG IBES, which compiles estimates from analysts. That's substantially higher than the 15.2% growth that had been expected for the period when the year began.

First-quarter earnings grew 29.4% year-over-year, based on LSEG data.

S&P 500 energy sector .SPNY earnings are expected to have increased 117.4% year-over-year for the second quarter, while technology .SPLRCT sector earnings are seen rising 65.5%, LSEG data showed.

(Caroline Valetkevitch)

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