To The Moon

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The earnings season is coming, and it could be just the catalyst needed to take the US stock market to the next level!

This week, companies like $Delta Air Lines(DAL)$ , $Canopy Growth Corporation(CGC)$ , $JPMorgan Chase(JPM)$ , and $Fastenal(FAST)$ are all set to release their first-quarter earnings, and chances are they'll beat analysts' expectations.

Chris Senyek, the chief investment strategist at Wolfe Research, said:

Over the past four quarters, the S&P 500 has beaten earnings estimates by an average of 7.1%. And since analysts have already trimmed their first-quarter forecasts by 2.5%, it's likely we'll see some positive surprises this quarter.

But beating earnings isn't enough. The market needs some positive forward-looking guidance from management teams to justify these higher valuations.

Since bottoming out in October, the $S&P 500(.SPX)$ has rallied 25%, and its forward P/E ratio has jumped from 16.7 to 20.1. Solid earnings forecasts will validate the market's belief that sales and profits will continue to grow, keeping the rally going.

According to 22V Research, in the past three months, there have been more companies raising their forecasts than lowering them, and the gap is near its widest in about two years.

Most S&P 500 companies are expecting quarter-on-quarter growth in sales and earnings this year. As long as they continue to show that demand for goods and services is strong enough to support this trend, the stock market has the momentum to keep climbing, especially with the Fed no longer hiking rates.

Senyek added:

Management guidance should be good too, reflecting Fed Chair Powell's willingness to let the US economy heat up over the next few months. So, the first-quarter earnings season is shaping up to be a bullish one for the stock market.