With results from two thirds of S&P 500 members already out, as of Monday November 2^nd,

The Q3 earnings season has turned out be a lot stronger than originally expected, based on results from two thirds of S&P 500 member companies that have reported results through Monday November 2^nd.

The proportion of companies beating EPS and revenue estimates is at a record level, as is the magnitude of these positive surprises. Growth is still negative, but a lot better than what we saw in the second quarter. Importantly, estimates for the current period (2020 Q4) have been going up since the quarter got underway.

Despite this positive earnings performance, the median stock is down after reporting quarterly results.

The likely explanation for this underperformance is the market’s worries about economic and earnings outlook given surging Covid cases and Congress’ inability to renew the fiscal relief measure. Economic growth was strong in Q3, but it is reasonable to be wary of expectations for Q4 and beyond given these headwinds.

These uncertainties prompted a number of major companies to either not provide guidance, as was the case with Apple (AAPL Quick QuoteAAPL - Free Report) , or provide a mixed outlook. That said, Tech sector results have been very strong and the post-release weakness in Apple (AAPL Quick QuoteAAPL - Free Report) , Amazon (AMZN Quick QuoteAMZN - Free Report) , Microsoft (MSFT Quick QuoteMSFT - Free Report) and others is likely more a function of sell-the-news type of behavior than anything wrong with the results.

For more details about the Q3 earnings season and expectations for the coming quarters, please check out weekly Earnings Trends report.