ExxonMobil and Chevron release quarterly earnings!

Two major U.S. energy giants released their Q2 earnings: ExxonMobil’s stock fell 1.4%, while Chevron’s rose 2%. Both companies posted record Q2 profits. However, ExxonMobil’s growth fell short of expectations—primarily because a disproportionately large share of its operations are in the Middle East, which dragged down gains from domestic shale oil production and other regional output. Chevron, by contrast, has minimal exposure to the Middle East, and its results surpassed market expectations. One particularly noteworthy figure in Chevron’s report: U.S. shale oil production costs have declined by 25% compared to 2025. With Trump offering no clear policy direction, the Middle East situation remains highly ambiguous. The most critical implication is that U.S. energy interest groups have yet to coalesce around a strong, unified lobbying agenda—market supply restoration remains uncertain. Trump is waiting for U.S. energy firms to ramp up production before deciding his next steps; meanwhile, those firms are waiting for Trump to clarify his strategy before committing to full-scale expansion. U.S. energy companies hold extensive operations across the Middle East. They can tolerate a return to stable supply—but if stability proves permanently unattainable, they possess fallback capacity in domestic shale oil and reserves elsewhere. A pivotal threshold looms: as U.S. shale oil output continues expanding—expanding, expanding, and expanding further—until it reaches a certain proportion of total supply, the United States may no longer bear the geopolitical weight of keeping key straits open. At that point, a powerful lobbying coalition—rivaling the military-industrial complex—will likely emerge. Oil is an entire industrial chain. Sustained shale oil expansion will continuously drive related industries domestically. Shale oil is light crude. Discovered in 2014, its revolution stalled for years due to lack of market access—meaning substantial room remains for U.S. shale oil’s “industrial optimization.” Industrial optimization works like this: early mobile phones (e.g., brick-like “big brothers”) offered poor value; only after intense market competition did devices shrink dramatically, gain functionality, and see costs plummet exponentially. Shale oil is light crude. If markets are forced to accept light crude, infrastructure must be upgraded: refineries and downstream industries must purchase new equipment and rebuild entire production lines. Shale oil’s extraction and refining costs remain significantly elevated—not due to inherent inefficiency, but because “industrial optimization across the market remains severely underdeveloped,” leaving ample room for cost reduction. A key advantage of shale oil is its ability to be sold bundled with natural gas. That is why Chevron’s reported 25% drop in U.S. domestic shale oil production costs is so significant: if supply shortages persist, markets will be compelled to embrace shale oil—and competitive pressures across the upstream-downstream value chain will continue driving down production costs. That inflection point has not yet arrived. ExxonMobil’s profit growth reached 60%. Yet this 60% must be netted against supply-chain procurement costs—meaning a broad swath of supporting enterprises also benefited. Why hasn’t the inflection point arrived? As of Q2, ExxonMobil’s Middle East exposure caused its performance to reflect “both gains and declines”—indicating that ExxonMobil, and the broader U.S. petroleum industry, remain comfortable with the prospect of restored Strait access. Surging oil prices lift profits; returning to normal prices lowers them—U.S. energy firms can accept that. What they cannot accept is a scenario where growth stems overwhelmingly from “exponential expansion” of domestic shale oil—only for straits to suddenly reopen, flooding the market and eliminating oil shortages, thereby causing shale oil to glut and stall, triggering mass distress among domestic producers. Iran and the U.S. are engaged in a perilous game. Once U.S. corporate business models undergo fundamental transformation, America’s priority will shift—not from “restoring Strait navigation” to “ensuring Strait closure.” This can be achieved simply by continually imposing harsh demands on Iran; Iran’s Revolutionary Guard will then do Washington’s work for it.

U.S. equity Q3 earnings preview: Exceeding expectations yields diminishing rewards, missing estimates triggers heavier penalties—beware three 'invisible profit killers'!

The U.S. equity Q3 earnings season has officially begun. While headline figures appear robust, beneath the surface lies turbulent undercurrent—profit growth is highly concentrated, cost pressures are mounting, and the market’s tolerance for 'beating expectations' has sharply declined. According to Bank of America Securities’ latest report, the consensus forecast expects S&P 500 Q3 EPS to grow 27% year-on-year; BofA’s own forecast is even higher—at 32% (equivalent to $93.50 per share). Among early-reporting companies, 85% exceeded EPS expectations—well above the historical average of 71%—and macro conditions remain broadly favorable. Yet, as major banks—including JPMorgan Chase, Goldman Sachs, Wells Fargo, and Citigroup—report this week, the core tension of this earnings season is coming into focus: after two consecutive quarters of widespread, outsized beats, 'beating expectations' has become the new market norm—so does it still move the stock price? BofA data shows that in Q2 2026, 77% of S&P 500 constituents beat EPS expectations—the highest 'beat rate' since 2021. Yet market reactions have clearly dulled: among firms beating both EPS and revenue expectations, their average next-day outperformance versus the S&P 500 was just 0.7 percentage points—roughly half the historical average of 1.4 points. Conversely, firms missing both metrics underperformed the index by an average of 3.3 points the next day—slightly worse than the historical penalty. This asymmetry sends a clear signal: the market has grown stingy in rewarding good news, while its punishment for bad news remains undiminished. BofA warns that for investors, the true risk this earnings season may lie not in the results themselves—but in three 'invisible profit killers': commodity costs eroding margins, doubts over AI narrative delivery, and overly optimistic 2027 outlooks. Profit concentration hits a historic extreme; median-stock growth nearly stalls On the surface, this quarter’s earnings season looks impressive: consensus forecasts project positive EPS growth across all 11 sectors—an occurrence seen historically only once before. But peel back the index-level veneer, and the picture changes dramatically. Per Goldman Sachs data, the top 10 S&P 500 profit contributors are expected to account for 68% of the index’s total Q3 EPS growth—up sharply from 47% in Q1 and 48% in Q2. Micron Technology alone contributes 19% of the index’s growth; NVIDIA contributes 15%. Together, these two firms account for 34% of the S&P 500’s Q3 EPS growth. Other contributors include Meta (7%), Alphabet (6%), and Broadcom (5%). Also benefiting from Middle East conflict-driven oil price spikes are ExxonMobil, Chevron, and Marathon Petroleum. For the vast majority of other companies, prosperity is fading. Consensus forecasts expect median S&P 500 EPS growth in Q3 to be just 9%—down from 14% in Q2—and analysts anticipate “sequential deceleration across all sectors except Information Technology and Communication Services.” On margins, analysts have lowered median Q3 margin forecasts by 11 basis points since the start of the quarter—“with downward revisions across every sector except Information Technology.”