Wall Street analysts are truly in love with stocks heading into third-quarter earnings season, leaving virtually no room for error if results and forecasts fall short in some way.
Sixty percent of S&P 500 stocks (^GSPC) now have a buy rating from Wall Street analysts, the highest level ever, according to new data from FactSet.
Other interesting findings from the report include:
The Buy rating percentage is above its 5-year average of 55.9%, while the Hold rating percentage is below its 5-year average of 38.6%. The Sell rating percentage is also below its 5-year average of 5.5%.
Analysts are most bullish on the Communication Services (XLC) (70%), Technology (XLK) (70%), Materials (XLB) (64%), Energy (XLE) (64%), and Healthcare (XLV) (61%) sectors, which have the highest percentages of Buy ratings.
Analysts are most pessimistic about the consumer staples (XLP) sector (45%), 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%).
Since June 30, the percentage of buy ratings on S&P 500 companies has increased slightly, from 59.7% to 59.9%.
“When everyone is expecting good news, there is less room for positive surprises,” said Charlie Bilello, Creative Planning’s chief market strategist.
Learn more: 3 charts that will make investors fall in love with stocks again
This optimism finds its source in the outlook for corporate profits.
The S&P 500 is expected to report year-over-year earnings growth of 29.5% for the recently completed third quarter.
If that happens, it will mark the third consecutive quarter of earnings growth above 25%, according to FactSet. This would also represent the eighth consecutive quarter of double-digit profit growth.
For the fourth quarter, Wall Street analysts expect profit growth of 27.6%.
Analysts are forecasting year-over-year earnings growth of 32.4% for 2026, once all is said and done.
Brian Sozzi is the editor-in-chief of Yahoo Finance, host of the Sozzi unleashed the morning show and Power Actors with Brian Sozzi podcast and member of the Yahoo Finance editorial leadership team. Follow Sozzi on @BrianSozzi, InstagramAnd LinkedIn. Any advice on stories? Email brian.sozzi@yahoofinance.com.
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