Big Banks Open Q3 Earnings Season Tuesday With S&P 500 Profits Forecast Up Nearly 30%

Third-quarter earnings season starts Tuesday, Oct. 13, and the bar is high.

JPMorgan Chase, Goldman Sachs, Citigroup and Wells Fargo are scheduled to report Tuesday. Morgan Stanley and Bank of America follow Wednesday.

The numbers Wall Street has to hit

FactSet's consensus calls for S&P 500 earnings to rise 29.5% from a year ago, on revenue growth of 12.3%. Three months ago the earnings estimate was around 27%.

That direction is unusual. Analysts raised quarterly estimates by 1.4% during the quarter. Over the previous five years, they cut them by an average of about 2.2%.

Tech is carrying the load. Analysts expect tech profits to jump 65%, up from an estimated 57% three months ago. FactSet says upward revisions for Nvidia, Micron Technology and Dell Technologies are doing most of that lifting.

Profit growth is also spreading beyond the Magnificent 7. Russell Investments forecasts 27% year-over-year gains for the other 493 S&P 500 stocks, ahead of the Mag-7 average. Ed Yardeni of Yardeni Research expects S&P 400 MidCap operating earnings to rise 19% in 2026.

Beating estimates is routine. S&P 500 profits have topped quarterly estimates by healthy margins since mid-2023.

Banks go first, and they are under pressure

The market is near records while the banks are not. The S&P 500 and Nasdaq both hit all-time highs last week. The S&P reached 7,844, according to analyst Andrew McElroy. The iShares S&P U.S. Banks UCITS ETF is down 7.7% over the past month. Financials have fallen 5% since Aug. 31 and are hovering around their 200-day moving average.

Rising rates are the stated worry. Analysts at CMC Markets say higher rates should mean higher loan income in theory. In practice, they say, if rates climb too fast and stay high, customers stop taking out mortgages and investment loans, and existing borrowers struggle to repay.

The 10-year Treasury yield recently touched about 5.35%, its highest level in roughly 24 years. That makes bonds more competitive with stocks and squeezes valuations.

JPMorgan reported earlier this month that the value of deeply distressed U.S. loans rose to $65 billion in the third quarter, up from $40 billion a year earlier and the highest in more than six years.

CEO Jamie Dimon has spent months warning about it. "I think there's a risk that inflation is sticky, that rates continue to go up and so, for corporations, whether you're leveraged or not, when you have to [refinance] or borrow money are you prepared for higher credit spreads?" he said on a podcast last week. Dimon's outlook tends to move markets.

Julian Emanuel, senior managing director at Evercore ISI, says the weakness could set up a relief rally. He also says results and guidance could send bank stocks either way. "There will be volatility as investors hang on every word from the Big Banks this week," he wrote in a note.

Bulls and skeptics

Goldman Sachs moved to an "overweight" stance on equities Monday, saying "growth remains supportive." Christian Mueller-Glissmann, head of asset allocation at Goldman Sachs Research, sees low recession risk and expects inflation to ease in 2027. He calls that "more of a 'Goldilocks' backdrop." His recommended positioning is a barbell of AI beneficiaries and selective rate-sensitive, high-dividend, low-volatility stocks.

Lisa Shalett, chief investment officer at Morgan Stanley Wealth Management, says the setup looks favorable because multiples have fallen.

The cautious camp is not predicting a miss. It is saying a beat may not be enough. Charu Chanana, chief investment strategist at Saxo, says: "Markets are entering earnings season with a high bar, so investors need to look beyond whether companies beat consensus." She says the quality of earnings, the growth outlook and the ability to turn investment into cash flow will matter just as much as headline numbers.

Her point on AI spending is specific. For Microsoft, Alphabet, Amazon and Meta, another increase in capital expenditure may not impress without stronger cloud demand, paid AI adoption and evidence of future cash generation. Memory chips carry their own risk. Tight supply and strong AI demand have propped up pricing, but fat margins can encourage manufacturers to add capacity.

What a big run looks like

Through Oct. 7, the S&P 500 had returned 13.75% year to date. A few stocks have run far past that.

Dell is up more than 353% this year. In its fiscal second quarter, it reported non-GAAP earnings of $7.04 per share against a $4.90 estimate, and revenue rose 57.8% to $46.97 billion. It also reported a record $95 billion backlog. Free cash flow fell 47% to $986 million, and management described the company as supply constrained.

SanDisk has returned nearly 515%, from $237.38 to $1,692.42. Its fiscal fourth-quarter revenue rose 371.6% with an 84.6% gross margin.

Those are the profit stories investors are paying up for. Technical analyst McElroy expects the S&P 500 to keep climbing toward 8,000 in the fourth quarter, but slowly and with volatility around events like the CPI report.

What comes next

The first read comes Tuesday from JPMorgan, Goldman, Citigroup and Wells Fargo. Investors will focus on loan growth, balance sheets, M&A activity and the IPO pipeline. Morgan Stanley and Bank of America report Wednesday.