Earnings season got off to a great start last week as the banks led off the season with a strong performance.
As of Friday, 14% of the S&P 500 had reported their quarterly results.
79% of those companies reported better-than-expected earnings per share with 64% of them beating their revenue targets.
Overall, the reports showed solid growth over last quarter’s results, but this week things are getting serious.
Last week’s results were “padded” a bit by the large banks. Lowering interest rates and an improvement to the economic outlook helped these companies grow their bottom line.
The great earnings results can be seen in the performance of the S&P 500 Bank ETF which surged almost 7% last week.
Don’t jump in the banks too quickly though. This sector is one of the best known for starting the quarter off on a strong note, only to drop quickly in the weeks following the beginning of earnings season.
It's literally the king of “sell the news” sectors.
That is now going to be followed by a real test as Wall Street gets a good look at a wide swath of earnings from several industries, not just the banks.
In all, we’re going to see more than 100 of the S&P 500 companies – 113 to be exact – drop their quarterly earnings results on Wall Street’s doorsteps. That’s 18% of the total weight of the S&P 500, so volatility may be the name of the game this week.
Companies from technology to auto manufacturing to technology and consumer products, it’s the melting pot week when it comes to the quarterly earnings season.
The top 10 S&P 500 companies announcing their results are listed below.
The market is flashing a few warnings signs for you to be cautious of.
First, the CBOE Volatility Index (The “VIX”) just moved below 20 at the end of last week.
This indicates that traders are letting their guard down as premiums on the S&P 500 options are dropping. Think of it as the premium to insure your house dropping.
These moves are good for the market in general as sentiment is shifting from bearish to bullish, which means investors are moving cash from the sidelines into stocks.
As with anything, too much of a good thing is bad.
Watch the VIX for sharp declines this week. Any reading below 15 means that you should start to batten down your portfolio’s hatches for some stormy weather in the market.
In addition, the CNN Fear & Greed Index is once again in “Extreme Greed” territory.
Most investors may throw this indicator aside given its source, but don’t be so quick to do that.
The CNN Fear & Greed Index has been incredibly timely in marking both market tops and bottoms over the past five years.
Most recently, the index hit similar readings in March, just as the market was preparing for a 5% decline in the beginning of April.
Granted, 5% is a relatively small drop, and with stocks at their current all-time high levels, a 5% decline would be a “pause that refreshes”.
That April decline was also almost one week after bank earnings had been turned in.
From an indicator view, keep an eye on the VIX.
A reading back above 20 will increase the market's "chop" as short-term traders start to take profits at the recent highs for stocks.
For the most part, stocks should coast through to Thursday without too much resistance.
We won’t see a market that goes through the roof before then, probably sideways trading as investors wait for Amazon’s (AMZN) results to come in after Thursday’s close.
Amazon represents the biggest report of the week.
The company represents AI, consumer spending, and business spending with its cloud services business. Very few companies can represent the market the way that Amazon does.
Last quarter, Amazon beat on the top and bottom earnings numbers, but the stock lost more than 12% at its lows the following trading day.
The reason is simple, expectations.
Companies like Amazon, Microsoft, NVIDIA (NVDA) and Google (GOOGL) are now trading on valuation that are based on investor’s lofty expectations for their stocks because of AI.
Amazon’s management failed to raise their expectations for the current quarter, resulting in the 12% selloff.
Amazon is eerily trading within 2% of its prices just ahead of last quarter’s earnings results.
A miss on the earnings results OR failure for Amazon to set their revenue and earnings per share guidance higher will cause a chain reaction for large cap technology stocks.
Investors will go on the defensive with a mind towards selling as this would represent the second quarter in a row of lackluster results.
The move would also put Microsoft, Apple, Google and in the hot seats ahead of their earnings reports next week.
Bottom line, Amazon is the most important earnings report this week.
A miss or anything close to a miss – including the company’s failure to not raise expectations for next quarter – will result in a repeat performance of last quarter’s 12% drop.
But there’s a catch.
A similar drop to last quarter’s would slice through every significant technical support level, leaving the stock in the hands of investors that will start climbing over each other to sell their shares.
These are the type of events that kick off “October Surprises”.
A breach of last quarter’s post-earnings lows would target a short-term pullback to $150 which is where Amazon’s 20-month moving average sits to provide support.
A break of that 20-month trendline would put Amazon into a long-term bear market trend, something that I’ll pick up with here if it happens.
Long-term investors will want to eye the level that they are willing to add to their positions at ($150 being the first level) in order to dollar cost average into the stock.
More aggressive investors may wish to buy temporary “protection” against that 12%+ drop in the form of put options.
The November 15, 2025, AMZN $180 Puts are trading just over $400 per contract.
One of those contracts would “protect” 100 shares of Amazon dollar for dollar if the stock were to follow the same path it took after last quarter’s earnings disappointment.
Should shares of Amazon decline to that $150-$160 would result in the option trading for more than $2,000. Proceeds that could be used to dollar cost average into additional shares.
As always, please make sure that you have the appropriate level of trading knowledge and options education before using any options strategy.
We’ll check back in after Amazon’s earnings with a short update.