STOCKS | Earnings-Season Selloffs Intensify for Companies Missing Estimates

U.S. stocks are seeing some of the harshest post-earnings selloffs on record for companies that miss expectations, as investors grow more sensitive to slowing profit growth. According to Sina Finance, Amazon plunged on Friday after its earnings report, while Alphabet fell by a record amount on Thursday following disappointing results; selloffs in communication services stocks that miss estimates have been the steepest since data collection began in 2019, with a similar pattern in heavyweight technology stocks. With earnings season about one-third complete, S&P 500 companies’ earnings growth has slowed to about 26%, from 32% in the second quarter. Strategists at Wells Fargo and Franklin Templeton have warned in recent weeks that higher interest rates, trade-tariff pressures, and elevated oil prices could slow earnings growth. Industry research data cited in the report put third-quarter technology earnings growth at 65%, down from nearly 77% in the prior quarter, and communication services growth at 3.2%, down from nearly 10%. Technology and communication services were the only sectors to fall this month, while all other sectors rose. Northlight Asset Management Chief Investment Officer Chris Zaccarelli said the market is more sensitive than usual and investors would rather sell first than risk further losses. Truist Advisory Services Chief Investment Officer and Chief Market Strategist Keith Lerner said the two sectors make up half the market, leading investors to demand more evidence that the trade remains viable; he added that slower growth challenges that narrative. Bokeh Capital Partners Chief Investment Officer Kimberly Forrest said investors are trimming some of technology stocks’ prior excess gains and buying cheaper stocks in other areas rather than leaving the market entirely. Overall earnings are still expected to grow: industry research estimates put S&P 500 earnings growth closer to 20% during 2027 and into the first quarter of 2028. Franklin Templeton Institute Chief Investment Strategist Jeff Schulze said that would exceed the historical 10% threshold associated with further market gains after earnings growth peaks, and that the S&P 500 could return high single digits to low double digits in 2027 if earnings meet expectations. So far, the share of S&P 500 companies beating Wall Street estimates is at its lowest level this year, including in technology, consumer discretionary, and financials. Zaccarelli said earnings misses in one area could prompt rapid repricing across related areas.