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Illustration: Sarah Grillo/Axios

With Q3 earnings season nearly over, investors are applauding, even cheering companies that fall short of expectations or signal next quarter won't be as rosy as previously thought.

Why it matters: Investors' renewed optimism that's pushed stock prices to all-time highs is giving businesses more leeway than in the past.

  • Profits on a per-share basis are still on track to drop 1.2% year-over-year — though, as more reports come in, that figure has improved from initial estimates that had forecast as much as a 3% fall in earnings.
  • “Expectations were low for some of the sectors exposed to the overall economy and trade. Some of those fears have really subsided, creating a good quarter,” James Ragan, an analyst at firm DA Davidson, told the WSJ.

By the numbers: S&P 500 companies reporting fatter profits than analysts expected have seen average share prices pop 2.3% days before and after their report — above the five-year average of 1%, according to FactSet.

  • As for corporations that unexpectedly disappoint, those share prices have fallen an average of 1.5%, less than the 2.6% that stock prices have dropped on average in the past five years when companies missed estimates.

The bottom line: Investors' glee for just-OK earnings is a shift from a year ago. On-edge investors then weren't rewarding the slew of companies that exceeded analysts' profit expectations.

  • Those stocks saw no price change on average, while companies reporting worse news than expected saw an average price decrease of just 3.2% — way above the five-year average price decrease.

What's next: S&P 500 profit estimates have dropped heading into next year. The downgrades, per UBS, are no worse than normal.

What's going on: Analysts scaled back future earnings estimates for 288 of the 461 S&P 500 companies that have reported Q3 results so far.

What they're saying: "The companies report and they lower their guidance. And then the analysts take their estimates a little bit lower from there," Nick Raich, CEO of earnings research firm The Earnings Scout, tells Axios.

  • "So when the companies are set to report, it's a low bar to clear. It's all part of the earnings game."

Go deeper: UBS issues a warning on earnings

Go deeper

Mike Allen, author of AM
53 seconds ago - Politics & Policy

The biggest headline from Biden's town hall

President Biden greets attendees during a commercial break in Baltimore last night. Photo: Nicholas Kamm/AFP via Getty Images

What matters from President Biden's town hall with CNN's Anderson Cooper at Baltimore Center Stage on Thursday, via Axios night owl Hans Nichols:

The biggest headline: Biden is jettisoning the corporate tax increases that White House officials have insisted, for the past 10 months, are wildly popular across the country. He admitted he doesn't have the votes.

Trump, your 2024 GOP nominee

Illustration: Shoshana Gordon/Axios

Former President Trump is telling most anyone who'll listen he will run again in 2024 — and poll after poll shows the vast majority of Republicans would gladly cheer him on and vote for him. 

Why it matters: Trump is the heart, soul and undisputed leader of the Republican Party and will easily win the nomination if he wants it, the polls make unmistakably clear.

Ina Fried, author of Login
60 mins ago - Technology
Column / Signal Boost

How smartphone cameras became the best cameras

Illustration: Sarah Grillo/Axios

For years, the smartphone has been the most convenient camera, and in recent years it has also become the easiest and most versatile camera. But this year's high-end smartphones have taken things to a new level — capturing images that would be either tough or impossible even with a high-end digital camera.

Between the lines: Traditional cameras have the advantage of bigger sensors and better lenses, but smartphone cameras are rivaling and even surpassing them by tapping computational power.