Infections of the COVID-19 delta variant may have crested. The debt ceiling showdown on Capitol Hill may have been delayed. Now, investors turn their attention to quarterly financial results.
It has been a turbulent third quarter. The rise of delta in July and August tamped down consumer appetites for travel and contributed to employers slowing down job creation. September bought a return to a familiar discord in Washington as the country bumped up against its debt ceiling amid the debate over spending trillions on traditional and social infrastructure. As the quarter ended, the chatter of the Federal Reserve inching closer to dialing back its extraordinary economic support increased.
Oh, and add worries about an enormous Chinese real estate developer struggling to pay its debts, and the ongoing challenges to the global supply chain.
It has helped sow doubts that the pandemic profit jump is about over.
Of course, the pace of profit growth will slow after the sharp snapback a year ago as the economy was reopening. Still, S&P 500 company earnings are expected to be up 26 percent from a year ago, according to FactSet Research. Fourth-quarter results are expected to be up 20 percent. That would represent the slowest growth this year.
That outlook is where investors will focus as big banks mark the unofficial beginning of third quarter earnings season in the week ahead.
Delta infections are falling. The détente in Congress, albeit temporary, eases the tension for now. The market is getting comfortable to the inevitability of Fed reducing its bond buying problem. But inflation is getting sticky. Companies are having to raise wages to attract workers. The supply chain remains strained. Energy prices are elevated. Trade tensions remain with China. And there’s certain to be some other surprises for the stock market to absorb.
Long-term investors know doubts are a normal part of the investment environment. Investors will be listening to hear how companies are working to steer around the worries.
Financial journalist Tom Hudson hosts “The Sunshine Economy” on WLRN-FM in Miami, where he is the vice president of news. He is the former co-anchor and managing editor of “Nightly Business Report” on public television. Follow him on Twitter @HudsonsView.