Stock Market Rally comes to an End, Earnings Reports Disappoint Investors
2022.11.18 14:47
Stock Market Rally comes to an End, Earnings Reports Disappoint Investors
Budrigannews.com – After a disappointing third quarter reporting period, analysts said that US earnings in the fourth quarter fell for the first time in two years, as rising interest rates and slowing growth further dampened the outlook.
Estimates for the 2023 quarter have also fallen, and Goldman Sachs (NYSE:) recently lowered its 2023 growth forecast per share to zero, citing lower profit margins.1
As of Friday, analysts had forecast a year-on-year decline for S&P 500 companies, according to Refinitiv’s IBES data, of 0.4 percent. That compares with a 5.8% increase they predicted in the Oct. 1.
The quarterly decline in S&P500 revenue was in the 2020 Q3, when companies were still reeling from the initial shock and disruption caused by the coronavirus pandemic.
The weakening profit outlook only adds to the concerns of investors who were concerned that an aggressive rate hike by the Federal Reserve to curb inflation could lead to a recession. The S&P 500 is down more than 17% so far.
“Third quarter revenue they missed expectations. But what we have really focused on is 2023,” said Michael Mullaney, Director of Global Market Research at Boston Partners in Boston.
“For the Fed to meet its inflation target, it must push the economy into recession,” he said.It said profit estimates for 2023 “have to go down a lot more.”
Jonathan Golub, head of U.S. Equity strategy and Quantitative research at Credit Suisse, wrote in a recent research note.
Several of the big tech and growth companies including Amazon.com and Facebook parent meta platforms hit investors with a big disappointment in the third quarter, giving forecasts of disappointment in the fourth quarter.
The rise in Treasury yields has weighed on stocks of particularly hard-tech and growing companies.
Wal-Mart (NYSE:) offered cheering to investors, but there were also among them, although the top retailers have reported disappointing results led by Target (NYSE:).
The results of 475 S&P 500 companies as of Friday estimated that Q3 revenue was up only 1% from 4.2 years ago. This is weaker than the 4.5% gain predicted at the beginning of the month, based on Refinitiv data.
Estimates of future earnings tend to decline as companies give guidance, but strategists said the decline this time was larger than usual.
Analysts expect S&P500 technology sector revenue to drop 7.8% in the fourth quarter, compared with the Oct’s 1.0% forecast profit. 1. Revenue in the telecommunications services sector is projected to fall by 20.9%, compared with the Oct’s 9.2% decline forecast. 1, as per Refinitiv data.
Overall, 11 out of 7 major S&P 500 sectors are expected to show revenue declines in the fourth quarter from the same period last year, based on data.
