Why US earnings season just got exciting

Despite what doomsayers think, global stockmarkets are in reasonable spirits, none more so than Wall Street. Despite a few hiccups, second-quarter results season has gone well for the most part and there's reason for optimism.

A lot has been baked into share prices and seemingly excessive valuations, particularly in the US, are based on expectations that earnings will grow fast. It's why this equities reporting season was always going to be one of the most important for some time.

If the market gets a whiff that a profits miss is anything other than stock or sector-specific, any selling risks becoming broader in nature.

Thankfully, second-quarter earnings so far have been a positive rather than negative catalyst for stock prices. That profits have largely either met or exceeded high expectations explains why major US indices are toying with record highs.

There's plenty more action to come, but, after mixed numbers from JPMorgan, Wells Fargo and Citigroup, all eyes were on Goldman Sachs Tuesday.

A recent drop in volatility is bad news for bank's trading arms, and Goldman is more exposed than most. Like JPMorgan and Citi, expect a big drop in quarterly trading revenue at Goldman, which is already the worst-performing Wall Street bank in 2017, and the only one that's lost shareholders money.

There's been much talk about tech stocks and bubble territory recently, and there'll be more when half-a-trillion-dollar Microsoft unveils results Thursday.

Corporate IT spend is tipped to grow in 2017 after two years of belt tightening. But Microsoft shares ain't cheap and, already trading at record highs, any shortfall this time will be punished.

That goes for all sectors, and a 40% dive in quarterly bond trading revenue at Goldman has been taken badly by investors. That said, write this market off at your peril! Netflix shares are just up 14% after three-month subscriber numbers smashed forecasts. There are still plenty of opportunities for sensible stock-pickers.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise.The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.