Why Q4 Earnings Season Could Be a Bullish Catalyst for S&P 500 Stocks

The Q1 2026 earnings reporting season—when most companies deliver Q4 2025 results—is shaping up to be a bullish catalyst for the S&P 500.

Uncertainty and concerns, bricks in the Wall of Worry, kept analysts from lifting their estimates in late 2025, despite the many strengths revealed in Q3 that were setting the index up to outperform. As of year-end, the consensus estimate is rising but remains well below where the tally will likely be at the end of the period.

The S&P 500 tends to outperform its season-starting consensus by at least a few hundred basis points. The trend in 2025 is outperformance at the high end of the range, closer to 500 basis points, and the Q3 results were much stronger. The average S&P 500 company outperformed by 570 basis points, suggesting that Q4 results will top out in the 14% range, perhaps even higher.

With this in play, the bullish trends at the end of 2025, including an outlook for earnings growth, growth acceleration throughout 2026, and an uptrend in the all-index consensus forecast, will continue to lift stocks in 2026.

The Market Rally Could Broaden Beyond Tech in Early 2026

While the Information Technology Sector (NYSEARCA: XLK) is expected to lead in growth and likely outperform its consensus, other sectors will contribute to market enthusiasm. Analysts have lifted the consensus forecast for technology, underpinning the quarterly index forecast, but lowered the bar for nearly all other sectors.

Certain sectors are well-positioned to exceed their forecasts and provide optimistic guidance for the year, offering investors an alternative to technology and the AI trade. Investors can access these sectors through ETFs that track them, such as the Consumer Staples Select Sector SPDR Fund (NYSEARCA: XLP), Consumer Discretionary Select Sector SPDR Fund (NYSEARCA: XLY), Utilities Select Sector SPDR Fund (XLU), Industrial Select Sector SPDR Fund (NYSEARCA: XLI), and Health Care Select Sector SPDR Fund (NYSEARCA: XLV).

But don’t discount the AI trade. AI will continue to underpin the technology sector’s revenue and earnings growth outlook, as well as those of other sectors. Businesses unable to monetize AI with their clients are using it to improve operational and business quality, thereby strengthening margins, earnings, and cash flow.

NVIDIA (NASDAQ: NVDA) remains the tech sector leader and is expected to grow its revenue by more than 65% in Q1, while also widening its margin. Other anticipated tech winners include Microsoft (NASDAQ: MSFT), Broadcom (NASDAQ: AVGO), and Micron Technology (NASDAQ: MU), which are forecast to grow revenue by 25%, 27%, and over 100%, respectively, but it will be the guidance that matters most. Signs at the end of 2025 suggest that AI spending trends will remain robust, with demand for GPUs, the HBM memory that supports them, and AI computing capacity sold out. 

Capital Returns Could Reinforce the Bull Case

Analyst outlook on share buybacks in 2026 varies but is generally bullish for stock prices. The consensus is for margin improvement and cash flow health to at least support buyback activity, if not lead to increases, and updates are expected during the Q1 reporting season.

Sectors best-positioned to issue increases include financials (expected to grow earnings by more than 6% in CQ4) and technology (which has significantly benefited from its AI-enhanced cash flow). Companies including NVIDIA, Advanced Micro Devices (NASDAQ: AMD), and Micron have seen their cash hoards grow, putting them in fortress-like positions to invest in growth, return capital, and sustain balance-sheet health. 

The takeaway for investors is that the S&P 500 is in an uptrend and the Q1 2026 reports are unlikely to end it. The more likely scenario is that this index will continue moving higher, setting fresh highs in Q1 and later in the year. The 2025 price action suggests the April-to-October rally is only half the move, and another significant updraft is coming. Assuming the index outperforms as trends suggest and the outlook remains favorable, the S&P 500 could reach the 7,400 level before the end of Q1 2026 and then continue moving higher through the year’s end. 

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The article "Why Q4 Earnings Season Could Be a Bullish Catalyst for S&P 500 Stocks" first appeared on MarketBeat.