The third quarter earnings season will take its first big steps this week, but Wall Street has already been dialing back expectations for months. According to a FactSet note on Friday, companies in the S & P 500 are projected to see a 4.2% increase in earnings compared to the same quarter a year ago, down from an expected 7.8% on June 30. That shift could be a sign that Wall Street is losing confidence in corporate America. But it should also make it easier for the stock market rally to continue in the weeks ahead, Bank of America equity and quantitative strategist Ohsung Kwon wrote in a note to clients. “The bar isn’t high. As long as companies have managed through macro headwinds and see early signs of improvement from lower rates, stocks should get rewarded,” Kwon said. And while the revision might seem big, third quarter growth estimates typically do decline in the preceding months. Over the past 20 years, the median revision for earnings expectations from July 1 to Oct. 7 is 3.2 percentage points, only a little below the past quarter’s 3.6-point change, according to Strategas. Of course, markets are forward looking, and investors will also be paying close attention to companies’ own projections for the fourth quarter and beyond, Kwon said. “Both Mag. 7 and Other 493 earnings are expected to slow in 3Q, but Other 493 earnings are expected to re-accelerate to low-to-mid teens growth starting in 4Q, while Mag. 7 earnings are expected to settle at +18-20%,” Kwon said, referring to the so-called group of Magnificent 7 stocks (Alphabet, Microsoft, Nvidia, Tesla, Apple, Amazon and Meta Platforms). PepsiCo reported mixed results for the third quarter on Tuesday, as the food and beverage company beat on earnings but saw softer sales numbers. Delta Airlines and JPMorgan Chase are some of the heavy hitters on deck for later in the week.