Stock-market investors brace for busiest week of earnings season. Here’s how it stacks up so far.

So far, so good?

Stocks ended the first full week of earnings season on Friday on a strong note, depressing the Dow Jones Industrial Average DJIA,
+2.47%,
S&P 500 SPX,
+2.37%
and Nasdaq Composite COMP,
-0.81%
to their strongest weekly gains since June. The coming week will be busier, with 165 S&P 500 companies, including 12 Dow constituents, due to report results according to FactSet making it the busiest week of the season.

The bar for earnings was set high last year as the global economy resumed its pandemic-like state. “Fast forward to this year and earnings will be subjected to tougher year-over-year comparisons. Add in the heightened risk of a recession, still-hot inflation and an aggressive Fed tightening cycle, it’s not surprising that sentiment is cautious going into the current 3Q22 earnings season,” said Larry Adam, chief investment officer for retail Group at Raymond James, in a Friday note.

“We have reason to believe that the 3Q 22 earnings season will be better than feared and could become a positive catalyst for equities, as did the 2Q 22 results,” he wrote.

Read: Stocks are attempting a rebound as the earnings season begins. Here’s what it takes to keep the gains going.

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Better-than-feared gains helped fuel a stock market rally from late June to early August, with stocks rebounding sharply from 2020 lows at the time before falling victim to renewed rounds of selling that ended in September, sending the S&P 500 plummeting lowest closing level since November 2020.

While gains weren’t the only factor behind last week’s gains, they probably didn’t hurt.

The number of S&P 500 companies reporting upside earnings surprises and the magnitude of those earnings surprises have increased over the past week, John Butters, senior earnings analyst at FactSet, noted in a note Friday.

But even with this improvement, earnings hits are still below long-term averages.

As of Friday, 20% of companies in the S&P 500 had reported their third-quarter results. 72% of those companies reported actual earnings per share, or EPS, above estimates, which is below the 5-year average of 77% and below the 10-year average of 73%, Butters said. Overall, companies are reporting earnings 2.3% above estimates, which is below the 5-year average of 8.7% and below the 10-year average of 6.5%.

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Meanwhile, the growth rate of blended earnings, actual earnings for companies that reported with estimated earnings for companies that have yet to report, rose to 1.5%, compared to 1.3% late last week, but it was still lagging below the estimated earnings growth rate at the end of the quarter at 2.8%, he said. And both the number and magnitude of upside surprises are below their 5-year and 10-year averages. Year-over-year, the S&P 500 is posting the lowest earnings growth since the third quarter of 2020, according to Butters.

The composite revenue growth rate for the third quarter was 8.5%, compared to a revenue growth rate of 8.4% last week and a revenue growth rate of 8.7% at the end of the third quarter.

Next week’s lineup accounts for over 30% of the S&P 500’s market cap, Adam said. And with the technology sector accounting for around 20% of the index’s returns, reports from Visa Inc. V,
+1.68%,
Google parent company Alphabet Inc. GOOG,
+0.94%

google,
+1.16%,
microsoft corp MSFT,
+2.53%,
Amazon.com Inc. AMZN,
+3.53%
and Apple Inc. AAPL,
+2.71%
is closely observed.

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Aside from the backward-looking numbers, guidance from executives will be crucial for the way forward amid recession fears, Adam wrote, noting that the guidance has remained resilient so far, with the net percentage of companies raising rather than lowering their outlook positively .

“For example, the ‘Summer of Revenge Travel’ was known to benefit airlines, but a comment from United UAL,
+3.56%,
American Eel,
+1.86%
and Delta Airlines DAL,
+1.34%
suggests that demand will remain strong in the coming months and into 2023. Ultimately, the broader and better the forward guidance, the greater our confidence in our 2023 profit target of $215 in the S&P 500,” said Adam.

The Rising US Dollar DXY,
-0.89%,
which remains not far from a two-decade high set late last month is also a concern.

See: How the Strong Dollar Can Affect Your Financial Health

“While the extent of the impact depends on the mix of costs and sales abroad and how much of the currency risk is hedged, a stronger dollar typically hurts returns,” Adam wrote.

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