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

Updated 57 mins ago - Politics & Policy

Supreme Court clears way for first federal execution since 2003

Lethal injection facility in San Quentin, California. Photo: California Department of Corrections and Rehabilitation via Getty Images

The Supreme Court ruled early Tuesday that federal executions can resume, reversing a lower court decision and paving the way for the first lethal injection since 2003 to take place at a federal prison in Indiana, AP reports.

The big picture: A lower court had delayed the execution, saying inmates had provided evidence the government's plan to carry out executions using lethal injections "poses an unconstitutionally significant risk of serious pain."

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Data: Axios/Ipsos poll; Chart: Andrew Witherspoon/Axios

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Why it matters: A weakening partisan divide over masks, and a broad-based increase in the number of people wearing them, would be a welcome development as most of the country tries to beat back a rapidly growing outbreak.

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Illustration: Eniola Odetunde/Axios

Testing buildings — not just people — could be an important way to stop the spread of the coronavirus.

Why it matters: People won't feel safe returning to schools, offices, bars and restaurants unless they can be assured they won't be infected by coronavirus particles lingering in the air — or being pumped through the buildings' air ducts. One day, even office furniture lined with plants could be used to clean air in cubicles.