Key Three Keywords for Q2 Financial Reports in the US Stock Market: Labor Market, Consumption, and AI

The U.S. Q2 earnings season is coming to an end, with AI investment still a hot topic among tech giants. Concerns about a U.S. economic recession have cast a shadow over this earnings season, with a cooling labor market and slowing consumption putting pressure on corporate performance.

According to the latest report from Goldman Sachs, the overall performance of the S&P 500 index in Q2 is better than expected. As of August 13th, 456 companies have reported their second-quarter earnings, representing 87% of the total market capitalization of the S&P 500 index. At the beginning of the earnings season, the Wall Street consensus expected annual earnings per share (EPS) to grow by 9%, but as the reporting season nears its end, this expectation has risen to 11%.

Goldman Sachs points out that the labor market, consumption trends, and artificial intelligence are the top three most mentioned words by U.S. listed companies in the Q2 earnings season, potentially becoming key factors affecting the U.S. stock market.

Is the Labor Market Still Healthy?

Goldman Sachs states that due to the July non-farm payroll data falling short of expectations, investors have shifted their focus back to the labor market. Some analysts point out that although the unemployment rate has risen to 4.3%, this is mainly due to labor supply friction caused by temporary layoffs and challenges in immigrant employment, with job vacancies still indicating stable labor demand.

Comments from U.S. companies also reflect the overall health of the labor market. While there have been discussions about reducing staff numbers or slowing down recruitment, overall, companies are showing a better balance between recruitment needs and available talent.

Goldman Sachs notes that the current labor supply-demand relationship is more balanced. The proportion of companies discussing labor shortages has fallen back to pre-pandemic levels, and the proportion of companies discussing layoffs in the second quarter remains relatively low.

Strong Consumption: What Does It Mean for the Economy?

Consumption trends are an important indicator of whether the U.S. economy is heading towards a recession, and U.S. companies have mixed attitudes towards consumers.

Some companies mention that due to macroeconomic pressures, consumers' purchasing power is challenged, leading to poor sales performance. However, some companies observe that consumer spending still shows resilience.

Goldman Sachs states that the performance of consumer sector companies is consistent with macro data. In the S&P 500 index, 60% of consumer companies exceeded expectations in the second quarter, indicating that U.S. consumption still has some resilience.

Goldman Sachs' developed consumer indicator - the U.S. Consumer Dashboard - also shows that the current U.S. consumption situation is very healthy.

Overnight, encouraging economic data and strong earnings helped U.S. stocks stage a major turnaround, with U.S. retail sales in July posting the largest increase in a year and a half, and jobless claims lower than economists' expectations, coupled with strong profits from Walmart, triggering a broad market rebound

Tech Giants May Continue to Increase AI Investments

According to a Goldman Sachs research report, companies' enthusiasm for AI technology remains high, while also paying attention to the investment scale needed to realize the potential of AI technology, especially for tech giants (such as Amazon, Google, Microsoft, Meta Platforms). The demand for AI products and services from these companies, as well as their AI investment plans, have attracted close attention from investors.

After the tech giants reported strong financial results, the market raised its consensus forecast for their capital expenditures and R&D budgets for 2025 by 3%.

Furthermore, the report also emphasized AI infrastructure companies, including data center REITs, utility companies, and semiconductor manufacturers, which benefit from continued investments in AI technology