2023-10-09 11:24:37
A strong economy and robust consumer demand are expected to drive modest third-quarter earnings growth for U.S. stocks, which may bring a glimmer of hope to U.S. stocks that have suffered a setback in recent months.
According to data from LSEG IBES,S&P 500 IndexThe overall profit of the constituent stocks is expected to increase by 1.3% compared with the same period last year. Although the market is still stagnant, it will be a rebound after three consecutive quarters of flat or declining prices.
Some investors believe this could boost weak U.S. stocks.S&P 500 IndexIt is currently down about 6% from its peak in late July, but is still up about 12% so far this year.
Matthew Miskin, co-chief investment strategist at John Hancock Investment Management, said that after a difficult September, “we need some upside from the earnings season.”
“Interest rates have been hit and confidence has been hit,” he said. “Although the economic performance is good, it needs to be reflected in numbers to support the stock market.”
Consumer prices soared to their highest levels in decades in 2022, with inflation depressing corporate profits in the first half of the year. Some market participants believe that relatively strong economic growth may make the third quarter a turning point.
The US September employment report released last Friday (6th) is the latest evidence of a strong economy. Employment growth was the largest in eight months, suggesting consumer demand may remain unchanged for now.
“The economy is still relatively strong and businesses, especially the larger ones, are well-positioned to pass on some of the price increases and maintain pretty strong profit margins,” said Rick Meckler, a partner at family-owned Cherry Lane Investments.
Concerns about rising interest rates and the possibility that the Federal Reserve may keep interest rates high for longer led to declines in all three major U.S. stock indexes in September and the latest quarter.
U.S. Treasury yields have soared to 16-year highs, with risk-free government bonds offering investors relatively high yields, making stocks less attractive.
LSEG data shows that even with the recent decline,S&P 500 IndexIts 12-month forward earnings forecast price-to-earnings ratio remains close to 18 times, above its long-term average of 15.6 times.
Investors will be watching for signs that rising interest rates are raising corporate costs, reducing companies’ ability to borrow and grow.
“If earnings fall, interest rates rise and growth looks a little soft, then there could be some pretty big earnings revisions,” Miskin said.
JPMorgan (JPM-US) and other major U.S. banks will report earnings on Friday (13th). Most earnings reports will be released in late October and early November. Other companies set to report earnings this week include Delta Air Lines (DAL-US), PepsiCo (PEP-US) and UnitedHealth Group (UNH-US)。
“If banks can set the tone well, it could be positive for the market,” said James Ragan, director of wealth management research at DA Davidson.
AI may once again become a key theme. Investors will be watching to see whether companies can turn optimism about the development of AI into an improved outlook. “We know the industry is investing heavily,” Ragan said. “Are they going to start talking about the business case?”
According to LSEG data, analysts expect the technology industry’s profits to grow by 6.0% in the third quarter, and the communications services industry’s profits to grow by 33.8%, the fastest growth among all industries.Investors will also pay close attention to the outlook for the fourth quarter, which is currently expected toS&P 500 IndexFourth-quarter profit will increase 10.8% year-on-year.
Although the economy has been more sluggish than expected this year, some investors expect the economy to slow as interest rate hikes begin to have an impact. Since March 2022, the Federal Reserve has raised its benchmark overnight rate by 525 basis points. One clue may come from the consumer discretionary industry, where profits are expected to rise 23.1% from the same period last year.
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