Yahoo Finance
Wall Street analysts are truly in love with stocks headed into the third quarter earnings season, leaving next to no margin for error if results and guidance come up short in any way.
Sixty percent of S&P 500 (^GSPC) stocks now carry a Buy rating from Wall Street analysts, the highest level on record, according to new data from FactSet.
Other interesting findings from the report include:
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The percentage of Buy ratings is above its 5-year average of 55.9%, while the percentage of Hold ratings is below its 5-year average of 38.6%. The percentage of Sell ratings is also below its 5-year average of 5.5%.
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Analysts are most optimistic about the Communication Services (XLC) (70%), Technology (XLK) (70%), Materials (XLB) (64%), Energy (XLE) (64%), and Health Care (XLV) (61%) sectors, which have the highest percentages of Buy ratings.
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Analysts are most pessimistic about the Consumer Staples (XLP) (45%) sector, which has the lowest percentage of Buy ratings. The Consumer Staples sector also has the highest percentage of Hold ratings (47%) and the highest percentage of Sell ratings (7%).
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Since June 30, the percentage of Buy ratings on S&P 500 companies has increased slightly to 59.9% from 59.7%.
“When everyone is expecting good news, there’s less room for positive surprises,” Creative Planning chief market strategist Charlie Bilello said.
Read more: 3 charts that will make investors fall in love with stocks again
The optimism is rooted in the outlook for corporate earnings.
The S&P 500 is expected to report year-over-year earnings growth of 29.5% for the recently completed third quarter.
If that plays out, it will mark the third consecutive quarter of earnings growth above 25%, according to FactSet. It would also represent the eighth straight quarter of double-digit percentage earnings growth.
For the fourth quarter, Wall Street analysts are calling for earnings growth of 27.6%.
Analysts are predicting year-over-year earnings growth of 32.4% for 2026 when all is said and done.
Brian Sozzi is Yahoo Finance’s Executive Editor, host of the Sozzi Unleashed morning show and the Power Players with Brian Sozzi podcast, and a member of Yahoo Finance’s editorial leadership team. Follow Sozzi on X @BrianSozzi, Instagram, and LinkedIn. Tips on stories? Email brian.sozzi@yahoofinance.com.
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