The Q3 earnings season is opening under macro pressure

Earnings Growth Outlook - Earnings growth for the S&P 500 is projected to slow to about 8.8% year-over-year in Q3, down from approximately 13% in Q2 and 11% in Q1, indicating a significant deceleration in profit growth [2] - Excluding oil and gas, the earnings growth number slightly increases to 9.6%, but the overall narrative remains that the profit engine is not operating at full capacity [2] Macro Economic Context - The Atlanta Fed's GDPNow estimates Q3 growth at around 3.1%, suggesting decent momentum but a rapid cooling trend [3] - Inflation rates held steady at approximately 2.9% in August, following 2.7% in July, while the 10-year Treasury yield is slightly above 4%, contributing to tighter valuations and market nerves [3] Sector Performance - Information technology is expected to lead earnings growth with around 21%, followed by communication services and financials, indicating that IT remains a critical growth driver [4] - Energy and consumer staples sectors are forecasted to experience declines due to volatile commodity prices and persistent costs, creating an uneven market landscape [5] Specific Sector Challenges - The energy sector appears particularly vulnerable, with analysts continuously lowering forecasts due to falling crude oil prices and inconsistent refining margins [6] - Consumer staples are facing challenges from input inflation and consumer fatigue, where previous price hikes that boosted earnings may now deter shoppers [6] Investment Opportunities - Goldman Sachs identifies 20 "overlooked" stocks, including Celsius Holdings, Cameco, Wynn Resorts, and Broadcom, which may see significant price movements in Q3, suggesting potential investment opportunities in less popular stocks [7]