It’s just a few weeks into third-quarter earnings season, but so far, it hasn’t been nearly as bad as Wall Street feared. In fact, the number of companies that have met or beat earnings expectations is only lagging previous seasons by a few percentage points – basically, results are holding up. Through Thursday morning, 75% of S & P 500 companies that had reported earnings had exceeded expectations, according to data from The Earnings Scout. That’s not too far off the trend over the last three years, where about 80% beat expectations, according to Nick Raich from The Earnings Scout. Some of this is due to companies lowering their guidance ahead of their reports, effectively pushing down the bar for earnings estimates to something they can more easily meet or exceed. Companies have also been helped by higher inflation, which means price increases that can boost sales numbers. In addition, raw material costs have declined, which can also help company profits. “If you look at the marketplace in general, the consumer is really strong,” said Brian Overby, senior markets strategist for Ally Invest. He added that in some cases, this is a benefit to companies that have raised prices due to higher inflation. He pointed to Procter & Gamble ‘s Wednesday report , which topped analyst estimates for earnings and revenue as higher prices offset lower sales volumes. Netflix earnings on Tuesday also beat expectations on top and bottom lines as the company added more subscribers in the third quarter than it expected. The company also said that though it’s growing slower than it’d like, it still has forward momentum. Going into the season, expectations were that earnings would be cut 15% to 20% to the downside, to reflect economic weakness, said Overby. “This could be a little bit of a bubble situation where if we don’t see that type of cutting, we could set ourselves up for a little bit of a bull market going into the year end,” he said. Why good news might again be bad news Earnings beats are good for investors as they generally send stock prices higher. But companies continuing to exceed expectations and giving better-than-anticipated guidance for the next quarter could further push off a potential recession that’s been weighing on markets for months. What’s perhaps more important than third-quarter results at this point is what companies say about future earnings, according to Raich. These statements should shed some light on whether the situation is getting better or worse. So far, he’s not seeing companies get as negative on the future situation as he’d like, possibly because companies have not had to deal with such high inflation in four decades and may not be sure what to do. “I actually want to see expectations to get slashed,” Raich said. “I want the analysts to capitulate, and the companies just get so negative on future earnings in 2023 that prices for earnings expectations end up having nowhere to go but up.” Right now, the weakened outlooks that companies are giving are not nearly negative enough to lead to capitulation and ultimately push the stock market to a true bear market bottom, he said. To be sure, it is early in the earnings cycle and so things could change. “I’d like analysts to rip the band aid off, slash the expectations and let’s get this over with,” Raich said. Instead, there’s likely to be prolonged agony and volatility as the market struggles for direction.