Every quarter, Wall Street plays the same game with the high-jump bar.
Analysts set their earnings forecasts when a quarter starts. Then, week by week, they quietly lower the bar.
By the time companies report, it sits low enough to step over.
Companies “beat.”
The headlines cheer.
Everyone goes home happy.
You can set your watch by it.
Over the past five years, analysts have cut S&P 500 Index earnings estimates by an average of 1.7% during the first two months of a quarter.
Stretch that out to 20 years, and the average cut grows to 3.1%.
This summer, they raised the bar instead.
And they did it for the second quarter in a row.
A Quiet Week, and A Loud Signal
First, a quick word on Adam’s system.
Every week, it scans the earnings calendar for two setups: companies primed to beat, and companies primed to disappoint.
With earnings season winding down, it came back empty for next week.
No bullish setups. No bearish ones.
I don’t mind a quiet week. It gives us room to step back and look at the whole board. And right now, we’re seeing something odd.
Look at the left side of that chart. In late 2022 and early 2023, analysts slashed estimates by more than 5% in three straight quarters. That’s what the game looks like when the economy scares people.
Now look at the far right. From June 30 to August 31, the third-quarter earnings estimate for the S&P 500 rose 1.2%, from $88.64 a share to $89.69.
That follows a 2.6% rise last quarter. Those are the two tallest bars above the line on the entire chart.
And the analysts aren’t guessing. Companies are telling them to raise it.
So far, 70 S&P 500 companies have issued upbeat guidance for the third quarter.
Only 41 have issued gloomy guidance.
In a typical quarter over the past five years, just 43 companies guided higher.
Analysts also lifted their full-year 2026 estimate 6.1% over the same two months, to $361.38 a share.
And they now expect third-quarter earnings to grow 28.5% from a year ago.
That’s a bar going up, not down.
In this market, that’s rare.
But 1.2% Is An Average
Picture a room with a bonfire in one corner and an open freezer in the other. The average temperature might feel fine. You wouldn’t want to sit in either corner.
That’s the S&P 500 right now.
Only four sectors saw their estimates go up. Seven saw them fall.
Energy is the bonfire. Its third-quarter estimate jumped 11.8%, nearly four times the next-best sector.
The reason is simple.
Oil has climbed 31% since June 30 to more than $100 a barrel.
Refiners Marathon Petroleum Corp. (MRO), Valero Energy Corp. (VLO) and Phillips 66 (PSX) led the charge.
Tech (+3.0%) and financials (+2.1%) came next.
In the tech space, Nvidia Corp’s (NVDA) third-quarter estimate rose from $2.35 a share to $2.47. Dell Technologies (DELL), Cisco Systems (CSCO) and Intel (INTC) pitched in too.
When it comes to financials, JPMorgan Chase’s (JPM) estimate rose to $5.84 from $5.49, with Goldman Sachs (GS) right behind. Plus, industrials added 1.1%.
Then there’s the freezer.
Materials estimates fell 9.1%. Dow Inc’s (DOW) third-quarter estimate dropped to $0.74 a share from $1.20. Fertilizer maker Mosaic Co. (MOS) fell to $0.06 from $0.29.
Consumer staples (-3.4%) and health care (-2.6%) slid, too.
That’s the broad picture.
But when we zoom in, the differences between these sectors become much more intriguing…
Not Every Raised Bar Is the Same
Here’s the part the headline number hides.
Energy’s rise is borrowed. It rides on oil prices, and no CEO controls them.
If oil gives back $15 a barrel, those estimates come down just as fast as they went up.
Meanwhile, the raises in tech and financials are different.
They came from the businesses themselves: demand for AI chips and servers, and busy trading and dealmaking desks. That kind of rise is harder to take away.
And the falling bars in materials and staples? It’s been said before that a lower bar isn’t always bad news.
Remember, it only matters whether the company keeps clearing it.
What To Do With a Quiet Week
Adam’s system has nothing on deck for next week. So put the downtime to work.
Pull up your portfolio. Match every stock to its sector on the chart above. Then ask one question about each: Why did the bar move?
If you own energy stocks, your estimates went up because oil went up. Enjoy it. But make sure you have a stop in place, because when oil turns, these estimates will follow.
If you own tech or financials, the business earned the raise. That’s a setup you can hold into an earnings report.
If you own materials or staples, estimates are falling.
Check what the company did last quarter. If it beats and estimates fall anyway, hold on. If it misses, don’t wait until October to find out whether it misses again.
Third-quarter reports kick off in mid-October, when the big banks step up first.
That’s when we find out whether analysts set this bar too high.
And the moment Adam’s system spots a setup worth flagging, you’ll hear about it here.
Have a great weekend, and until next time…
Safe trading,
Matt Clark, CMSA®
Chief Research Analyst, What My System Says Today
