US Stock Market
2025-08-05
■ Major US companies reported generally strong earnings for the period from April to June.
■ Unless recession fears intensify significantly, interest rate cuts are expected to support stock prices.
As of last weekend, 330 S&P 500 companies had released their earnings reports for the period. According to LSEG I/B/E/S, a financial information company, 81% of these companies reported earnings per share (EPS) above market expectations. Overall, EPS is expected to grow by 11.2% year-over-year (actual figures for companies that have reported, consensus figures for those that have not). This is significantly higher than the 5.8% forecast before the earnings season began in early July, indicating a generally positive performance. By sector, communications services (growth revised upward from 31.8% to 43.5%), information technology (17.7% to 22.5%), financials (2.7% to 12.8%), and consumer discretionary (-3.5% to 6.3%) are seen as the main drivers of improved earnings. The continued large-scale investment plans in artificial intelligence (AI) announced by major technology companies in their earnings reports have been well-received by the market; however, the positive impact on semiconductor companies is generally considered to meet expectations. The S&P 500's one-year forward price-to-earnings ratio (PER) currently stands at 22 times, a relatively high valuation. Nevertheless, driven by expected EPS improvements, the index continues to reach new highs.
Looking ahead, while EPS growth may slow slightly in July-September (+8.4% year-on-year) and October-December (+6.9%), the full-year 2025 growth forecast has been raised to 9.6% from 8.5% in early July, reflecting growing optimism. This also suggests that concerns about rising costs and slowing personal consumption due to the US government's tariff hikes are gradually diminishing. However, US real GDP data indicate that inventories accumulated in January-March in anticipation of the tariff increase were significantly reduced in April-June. As tariff policies become clearer, the market will enter a critical period of assessing the negative impact of tariffs in July-September and beyond.
Against this backdrop, the July US jobs report released last Friday showed a mere 73,000 increase in nonfarm payrolls, far below market expectations of 110,000. Furthermore, the May increase was significantly revised downward from 144,000 to 19,000, and the June increase from 147,000 to 14,000. Although the labor force participation rate fell from 62.3% to 62.2%, resulting in only a slight increase in the unemployment rate (4.1% to 4.2%), the overall data prompted the market to reconsider the Federal Reserve's (FRB) previous assessment that the labor market remained solid. Following the July FOMC meeting, market expectations for a September rate cut had fallen to 37%. However, after the release of the jobs report, the probability surged to 90%. While concerns about an economic slowdown have increased, they are not yet sufficient to signal a recession. The market generally expects the rate cut to provide support, and US stocks are likely to fluctuate upward within their highs, with some volatility.
■ Unless recession fears intensify significantly, interest rate cuts are expected to support stock prices.
As of last weekend, 330 S&P 500 companies had released their earnings reports for the period. According to LSEG I/B/E/S, a financial information company, 81% of these companies reported earnings per share (EPS) above market expectations. Overall, EPS is expected to grow by 11.2% year-over-year (actual figures for companies that have reported, consensus figures for those that have not). This is significantly higher than the 5.8% forecast before the earnings season began in early July, indicating a generally positive performance. By sector, communications services (growth revised upward from 31.8% to 43.5%), information technology (17.7% to 22.5%), financials (2.7% to 12.8%), and consumer discretionary (-3.5% to 6.3%) are seen as the main drivers of improved earnings. The continued large-scale investment plans in artificial intelligence (AI) announced by major technology companies in their earnings reports have been well-received by the market; however, the positive impact on semiconductor companies is generally considered to meet expectations. The S&P 500's one-year forward price-to-earnings ratio (PER) currently stands at 22 times, a relatively high valuation. Nevertheless, driven by expected EPS improvements, the index continues to reach new highs.
Looking ahead, while EPS growth may slow slightly in July-September (+8.4% year-on-year) and October-December (+6.9%), the full-year 2025 growth forecast has been raised to 9.6% from 8.5% in early July, reflecting growing optimism. This also suggests that concerns about rising costs and slowing personal consumption due to the US government's tariff hikes are gradually diminishing. However, US real GDP data indicate that inventories accumulated in January-March in anticipation of the tariff increase were significantly reduced in April-June. As tariff policies become clearer, the market will enter a critical period of assessing the negative impact of tariffs in July-September and beyond.
Against this backdrop, the July US jobs report released last Friday showed a mere 73,000 increase in nonfarm payrolls, far below market expectations of 110,000. Furthermore, the May increase was significantly revised downward from 144,000 to 19,000, and the June increase from 147,000 to 14,000. Although the labor force participation rate fell from 62.3% to 62.2%, resulting in only a slight increase in the unemployment rate (4.1% to 4.2%), the overall data prompted the market to reconsider the Federal Reserve's (FRB) previous assessment that the labor market remained solid. Following the July FOMC meeting, market expectations for a September rate cut had fallen to 37%. However, after the release of the jobs report, the probability surged to 90%. While concerns about an economic slowdown have increased, they are not yet sufficient to signal a recession. The market generally expects the rate cut to provide support, and US stocks are likely to fluctuate upward within their highs, with some volatility.