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US earnings season set to test war-rattled stocks
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US earnings season set to test war-rattled stocks
Apr 12, 2026 6:22 AM

NEW YORK, April 10 (Reuters) - Investors will seek evidence in the coming week that the U.S. corporate profit engine is humming along, and whether threats to that upbeat business outlook are emerging from the Middle East war https://www.reuters.com/world/iran/ and the resulting surge in energy costs.

First-quarter earnings season kicks off with reports from major U.S. banks. Expectations for a strong quarter and year for profit growth have underpinned bullish outlooks for stocks. Those expectations have remained intact as the conflict in Iran took hold over the past month.

"The reason the market still is so robust is because earnings estimates just keep moving higher. There's yet to be any sort of negative impact on fundamentals from the war," said Nick Giorgi, chief equity strategist at Alpine Macro. "If you start to see actually a bit of a negative cascade from fundamentals, then all bets are off."

Optimism about calming geopolitical tensions flowed through markets this week, fueled by a two-week ceasefire deal between the United States and Iran that followed threats from U.S. President Donald Trump about a severe escalation of the war.

The S&P 500 as of Friday had recouped nearly all its decline since the U.S. and Israel began military strikes in late February, with the benchmark index less than 1% lower over that period.

But the war remained at the forefront for markets expected to stay sensitive to Middle East developments into next week.

'HIGH BAR' FOR Q1 RESULTS

An estimated 10% of the S&P 500 will have reported first-quarter results by next Friday, with a flood of results due in the following weeks. Aside from banks, major company results next week include Netflix, Johnson & Johnson and PepsiCo.

Overall S&P 500 company earnings are expected to rise by about 14% compared to the year-ago period, according to analyst estimates compiled by LSEG IBES as of Friday. It would be the sixth straight quarter with double-digit growth, the longest streak since 2011, according to Mark Hackett, chief market strategist for Nationwide.

"It is somewhat of a high bar coming into the season," said Garrett Melson, portfolio strategist with Natixis Investment Managers Solutions.

Beneath the surface, expectations for the 11 S&P 500 sectors vary widely. The heavyweight technology sector is projected to drive earnings up more than 40%, while healthcare sector earnings are expected to decline 10%, according to LSEG IBES.

One focal point in the reports will be how companies see the ripple effects of surging oil prices, which stand to increase costs for an array of businesses and pinch consumer spending. Even with oil pulling back following the ceasefire deal, U.S. crude is up about 70% this year.

Overall expectations for full-year results have become more rosy. S&P 500 earnings are expected to rise more than 19% in 2026, up from an estimated 15% increase as of late February.

"You're going to see whether or not those earnings estimates hold up for the future or whether they get marked down," said Brent Schutte, chief investment officer at Northwestern Mutual Wealth Management Company. "Company guidance becomes incredibly paramount."

BANKS TO OFFER VIEW OF ECONOMY

Bank reports will provide a crucial window into the economy's health, investors said, with some concerns about a slowdown in the labor market ahead of the Middle East conflict.

Goldman Sachs reports on Monday, with JPMorgan, the largest U.S. lender, due on Tuesday along with Wells Fargo and Citigroup. Other banks report later in the week.

Their commentary about consumer behavior will be key, Melson said.

"What they're seeing for spending patterns is going to be pretty critical to get a sense on just how material is that kind of slowdown risk from a consumption perspective," Melson said.

Giorgi said he would focus on commentary about lending activity in light of the more volatile geopolitical backdrop.

"If banks say companies ... are looking past it, they still need to invest and they're still taking out loans, that would be a positive signal," Giorgi said.

Outside of earnings next week, investors will focus on a report on U.S. producer prices that is an important inflationary gauge.

Oil shocks typically take time to permeate through the economy, making the war a greater risk should it continue, Schutte said.

"The longer this goes on ... the greater impact it potentially has on leaking into U.S. inflation," Schutte said.

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