Published: Friday, November 14, 2025 · 10:30 AM | Updated: Friday, November 14, 2025 · 10:30 AM
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(Bloomberg) — The latest mini-selloff in US stocks has shaken most pillars of the three-year bull market. So far unblemished, though, is the support from Corporate America’s profit foundation.
Artificial intelligence euphoria is facing its first prolonged test, as investors look askance at massive borrowing to fund the technology’s buildout. The labor market still looks shaky, going by private data and a spate of layoffs. Federal Reserve officials are signaling they might not cut again this year as the threat to inflation from tariffs persists.
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Those worries combined to send the S&P 500 Index (^GSPC) to a nearly 1.7% drop Thursday, the third drop of at least 1% in eight sessions. Other risk assets suffered, with Bitcoin falling back below $100,000 and small caps plunging 2.8%.
For bulls, the wobbly market has put more emphasis on profits, and as another reporting season enters its final stretch, this much is clear: executives are expressing optimism for future earnings despite the bevy of uncertainties. Fresh off profit growth of 15% in the third quarter, profit guidance momentum, a measure of the share of S&P 500 members that lifted their earnings outlooks compared to those that maintained or lowered views, has climbed to the highest level since 2021, according to data compiled by Bloomberg Intelligence.
“This was a really strong earnings season, all about profit expansion,” said Scott Ladner, chief investment officer at Horizon Investment. “There are going to be selloffs, but margins are around all-time highs so this could be another buy-the-dip opportunity.”
Those rosy forecasts will get an early test next week when some of the world’s biggest retailers deliver their latest earnings figures. Investors will get a close look at how American consumers are faring in President Donald Trump’s tariff regime as Walmart Inc. and Target Corp. report. Consumer spending accounts for roughly two-thirds of America’s gross domestic product. Over the past few years, its resilience has also helped power the S&P 500 to record after record.
There’s reason for concern. Consumer sentiment tumbled to near the lowest on record as the government shutdown weighed on the economic outlook and high prices soured views about personal finances. What investors need to know is how long consumers can hold on with the Trump administration’s trade wars, weak job growth and sticky inflation.
Investors will look to the consumer companies, which also include TJX Cos Inc. (TJX.MX) and Ross Stores Inc. (ROST), to continue the trend of issuing guidance for next quarter and beyond that beat analysts’ expectations.
That optimism in the C-Suites marks an about-face from spring when companies pulled forecasts for the year or gave grim outlooks, citing rising costs, weak consumer sentiment and a lack of business confidence as a result of Trump’s worldwide trade offensive. The upbeat signal suggests the profit expansion may still have room to run.
Data from Bank of America (BAC) show similar optimism among analysts. Savita Subramanian, equity and quant strategist at Bank of America, noted that the market prognosticators haven’t made cuts to fourth quarter estimates yet and are making upward revisions to their earnings-per-share outlooks in 2026.
Of course, there are plenty of reasons for companies to be wary.
While third-quarter results are encouraging, “risks to watch include layoffs, tariff cost pressure & uncertainty, AI overbuild,” Subramanian told clients in a note on Monday.
There’s also the risk that the picture from earnings forecasts is incomplete. Only about a quarter of S&P 500 companies provide quarterly guidance, and just over half offer it on an annual basis, typically the technology and discretionary sectors. Earnings for most Big Tech companies have been in line or above expectations, though the outlook has been murky when it comes to where borrowing costs are headed.
Next week, Nvidia Corp. delivers quarterly earnings after the bell Wednesday and options traders are betting on one thing: the report will move the market. While a strong report could boost Nvidia shares and lead the market higher, any miss — real or perceived — could stop the rally in its tracks and add significant weight to the downside. Options traders are pricing in a 6.2% swing in either direction for the stock, its highest implied move in a year, according to data compiled by Bloomberg.
The S&P 500 firms that missed analysts’ earnings and sales estimates have trailed the benchmark’s performance by 3.9% on average a day after the results, the second-worst showing in a year, according to BI. The index has climbed 1.2% since JPMorgan Chase & Co. and other big banks kicked off results last month.
“The ramping up of AI scrutiny appears to be the main reason stocks haven’t responded favorably because a lot of the good earnings news has come from tech,” said Jeff Buchbinder, chief equity strategist at LPL Financial.
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