Bank of America: Strong Start to Earnings Season - FJElite

Earnings season has started strongly, with 50 S&P 500 companies representing about 20% of index earnings already reported and 88% beating EPS expectations, the best first-week beat rate in more than three years and well above the historical average. Strong bank results have helped lift blended second-quarter S&P 500 EPS by 1% since July 1, taking year-on-year growth to 23%, with expectations that this could rise further as reporting continues.

Banks have delivered across the board, with no EPS misses so far and especially strong performance in capital markets, while management commentary has also pointed to healthy consumer spending and lower-than-expected delinquencies. In cyclicals, early industrial read-throughs have been modestly encouraging, with signs of stable to slightly improving demand. In AI, Taiwan Semi and ASML both posted beat-and-raise quarters, reinforcing the view that the AI spending cycle remains stronger for longer, even if post-results price action shows the bar for AI winners is now very high.

The market reaction has also been constructive. Companies beating on both sales and earnings have outperformed the S&P 500 by 1.3 percentage points on average the next day, close to the historical norm and much better than the reaction pattern seen at the same point last quarter. Overall, the early message is one of broad earnings strength, with banks, capital markets, and AI infrastructure standing out most.