Muscular earnings season tempers US recession fears for now

Fatter-than-expected corporate profits came to the financial market’s rescue this earnings season, breathing new life into stocks after a mostly lackluster summer.

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Although earnings are on track to decline for the third straight quarter, about 75 percent of the 280 companies in the S&P 500 that have posted results so far have topped Wall Street’s expectations, according to FactSet.data cited by The Wall Street Journal. That is slightly above the five-year average of 72 percent.

While overall profits could fall about 3.2 percent from the year-ago period, the steepest decline since 2016, most analysts believe that may be the bottom, according to the Journal. Many project earnings growth will increase next year, tempering fears of a recession despite slowing global growth and a trade war between the U.S. and China, the world's two largest economies, that's curbing some corporate profits.

On Tuesday, stronger-than-expected earnings from Walgreens Boots Alliance and AT&T propelled the S&P 500 to a record high, surpassing its previous all-time best in July.

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Some of the profit beats occurred after corporations tamped down investor expectations amid a more challenging market. It’s not unusual for firms to issue those types of messages, but it has become more standard in recent years. According to FactSet, 39 companies gave negative estimates for the quarter, compared with 15 that issued positive outlooks.

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JPMorgan Chase reported strong results, delivering record revenue; United raised its outlook for the year; General Electric also boosted its forecast, despite external challenges from the grounding of Boeing’s 737 Max jetliner and the U.S.-China trade war; Coca-Cola’s revenue jumped 8 percent; and UPS logged a 24 percent jump in next-day air delivery volume.

Also helping to alleviate concerns about a slowdown were new data published on Wednesday, which showed the U.S. economy expanded at a 1.9 percent annualized pace in the three months through September. Though it was still slower than earlier in the year, the GDP expansion topped the 1.6 percent that economists surveyed by Refinitiv were expecting.

The Labor Department’s jobs report, which is set to be released Friday morning, will also shed light on the health of the U.S. economy, which is expected to have added 85,000 jobs in October. Analysts anticipate unemployment will edge higher to 3.6 percent, up from 3.5 percent in September -- a 50-year low. CLICK HERE TO READ MORE ON FOX BUSINESS