The U.S. corporate earnings season is turning out to be better than feared as consumer spending remains resilient, while stocks have already priced in much of the bad news, according to Citigroup Inc. and UBS Global Wealth Management strategists.

Of the U.S. companies that have reported so far, 60% have beaten sales estimates while 75% have topped profit expectations, Mark Haefele, chief investment officer at UBS GWM, wrote in a note. "Overall, earnings growth is slowing, but not sinking," he said.

Optimism that corporate earnings can weather a perfect storm of surging inflation, hawkish central banks and a potential recession has fueled a rally in stocks in July, putting the S&P 500 on course for its biggest monthly gain since October. While company guidance has started to reflect the pressure from high costs, UBS GWM strategists say consumer spending is still holding up, particularly in travel-related sectors.

"Airlines, hotels and credit card companies indicating that leisure demand is strong and business spending is picking up," Haefele wrote.

While only about a quarter of S&P 500 companies have reported results so far, Citigroup strategists led by Scott T. Chronert, said that financial companies have dominated early releases, with overall sales beating estimates by 1.6% and earnings positively surprising by about 5%. A better-than-expected second quarter could also offset some of the negative revisions in the second-half of the year, Citi said, while warning that the 13% growth expected for the third quarter "looks aggressive."

The U.S. bank has a contrarian view on corporate earnings for the year, expecting them to prove resilient to a possible U.S. recession as well as the impact of a stronger dollar. Moreover, Chronert said that tactical indicators following this year's selloff have set up the S&P 500 for a bounce either on the back of "less bad than feared" earnings or bets that rate hikes by the Federal Reserve are largely priced in.

"The 'earnings resilience' theme, which supports our second half S&P 500 index upside call, appears intact," Chronert wrote in a note dated July 22.

JPMorgan Chase & Co.'s Mislav Matejka also said that the outlook for equities was improving as investor reaction to earnings changes, with weaker results being seen as good news. Goldman Sachs Group Inc. strategist David J. Kostin, on the other hand, expects company revenues to come under pressure from a stronger dollar.

Sagarika Jaisinghani reports for Bloomberg News.

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