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Stocks didn’t accomplish much today, mainly trading within the range of the past two days. This morning, I reviewed earnings for various companies and will use the underwhelming session to highlight why earnings and fundamentals matter despite some believing they don’t.

Take META, for example. Notice how its earnings estimates for 2025 have been rising in lockstep with the stock price. This clearly indicates a stock rising with the support of increasing earnings estimates. The market is now trying to get a head start on the next round of earnings upgrades. If those upgrades don’t materialize, it could explain any future share decline.

Then there is JPM, which recently warned about its net interest income expectations. Analysts have already started cutting earnings estimates for 2025, and the stock’s weakness appears to reflect that.

Interestingly, Microsoft (MSFT), a stock I’ve owned for a long time, has seen its earnings estimates for fiscal 2025 and 2026 decline. This is noteworthy because, given the hype around AI, one wouldn’t expect it. However, it could certainly explain why the stock has struggled more recently.

The SOX index has struggled lately because its earnings estimates for 2024 and 2025 are declining. This doesn’t mean there will be no growth from 2024 to 2025, but the sector’s earnings power has been falling, causing it to stall.

The Nasdaq 100 has stalled because earnings estimates for 2024 and 2025 have also declined.

The same story applies to the S&P 500, with earnings estimates for 2024 and 2025 topping out and starting to turn lower. This is another reason stocks have struggled to move out of their range since mid-July.

I haven’t turned bullish on the market because stocks are expensive on a PE multiple basis, and I don’t believe the S&P 500 will earn $276 per share in 2025. I find it hard to believe that S&P 500 gross margins will climb to 13.8% in 2025, matching 2021 levels, when we had faster growth and higher inflation, which allowed for margin expansion. Margins in 2024 are expected to be 12.9%, with a 100 bps increase projected for next year. I’m not sure how that happens.

So, fundamentals do matter, and the difference lies only in how much an investor is willing to pay for those fundamentals.​ If the trend in earnings starts to decline at the fastest for 2025, stock prices will, too.

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