As quarterly U.S. earnings got under way with upbeat reports from JPMorgan Chase & Co and other major banks Friday, analysts marginally brightened their dim outlook for first-quarter U.S. results compared with a week ago.
Based on actual results from 30 of the S&P 500 companies and estimates for the rest, analysts now expect earnings for the S&P 500 in aggregate to have declined 4.8% in the first quarter of 2023 from the year-ago period, according to Refinitiv data Friday. That compares with their week-ago forecast for a 5.2% year-over-year decline in the quarter.
S&P 500 earnings fell 3.2% year-over-year in the fourth quarter of 2022, based on Refinitiv data, which means the first quarter still would mark a second straight quarterly decline in U.S. earnings, or a profit recession.
Investors have been eagerly awaiting quarterly results from banks following the collapse of two U.S. regional banks in March.
While shares of JPMorgan and other big banks rallied following Friday’s results, shares of regional banks mostly fell, with PNC Financial Services Group Inc ending nearly flat after it posted a quarterly profit beat but missed expectations on net interest income.
“While we don’t think earnings season will bring much in the way of good news, expectations are low enough that we may see stocks hold up again after results,” Gina Bolvin, president of Bolvin Wealth Management Group in Boston, wrote in a note Friday.
A slew of other regional banks are still due to report in the coming weeks, including Zions Bancorp on Wednesday. Quarterly results are also expected next week from Goldman Sachs Group and Netflix.
Data also showed that the number of Americans filing new claims for unemployment benefits increased more than expected last week, a further sign that labor market conditions were loosening up.
“This is a good indication that inflation is easing and dropping rather sharply. Jobless claims were also favorable news for the Fed,” said Peter Cardillo, chief market economist at Spartan Capital Securities in New York.
“Inflation both at the consumer and producer levels are going south, in the right direction ... even though elevated, it’s still good news and this is one big consideration in terms of the Fed ending its tightening cycle.”
The benchmark S&P 500 has traded in a tight range this month, having recovered from a selloff in March fueled by the recent banking crisis, as investors assessed the path for U.S. interest rates.
Wall Street closed lower on Wednesday after data showed consumer prices rose at a slower-than-expected pace in March, however, core prices remained sticky and supported the case for another 25-basis point rate hike by the Fed in May.
Investors mostly stuck to expectations of the 25-bps hike after Thursday’s data.
U.S. Treasury yields fell, boosting rate-sensitive growth stocks. Apple Inc, Amazon.com Inc and Alphabet Inc rose nearly 2%.
Economy-sensitive industrial, financial and energy sectors gave up some of their recent gains.
Minutes released on Wednesday from the Fed’s latest policy meeting indicated concerns of a recession following the banking sector stress and that several policymakers considered pausing rate hikes last month.
Big U.S. banks JPMorgan Chase & Co, Citigroup Inc and Wells Fargo & Co are scheduled to report quarterly results on Friday, and investors will watch them closely for details about the sector’s overall health.
Analysts expect S&P 500 companies to record a profit decline of 5.2% in the first quarter, as per Refinitiv IBES data, in what could be their worst showing since the third quarter of 2020.
Financial companies that are part of the S&P 500 are expected to report a profit growth of 4.3% in the first quarter.
At 9:43 a.m. ET, the Dow Jones Industrial Average was up 18.09 points, or 0.05%, at 33,664.59, the S&P 500 was up 13.74 points, or 0.34%, at 4,105.69, and the Nasdaq Composite was up 106.53 points, or 0.89%, at 12,035.87.
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