“Behind the stock market’s anxious ups and downs of late lies the fear that a weakening U.S. and global economy could dash hopes for an uptick in corporate earnings.
For the first quarter, earnings season is nearly done. More than 90% of big companies have reported results and they were lackluster.
Most beat analyst estimates, but only because expectations were rock bottom.
Profit gains for S&P 500 companies were just 2.1% overall compared with a year earlier, well below the previous quarter’s 8.5% rise, FactSet said.
Now investors are seeing soft reports on industrial production, housing starts, consumer sentiment and European economic growth, and they are growing anxious.
Investors had expected results to improve in the second quarter. Analysts are forecasting a 6% profit gain.
Yet of companies offering guidance, 72% have warned that second-quarter results could fall short of Wall Street expectations, which isn’t great but is better than the 80% level of the past three quarters.
Now, investors are worrying they may have been too hopeful.
“People have been expecting better earnings forecasts, but I’m a little more concerned that earnings estimates are going to be ticking down,” said Robert Pavlik, chief market strategist at Banyan Partners, which oversees $4.5 billion.
In the portfolios he manages, he has boosted cash holdings and shifted toward more defensive investments. He said he sold out of biotechnology several weeks ago and now prefers bigger, safer companies…..”
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