May 24, 2023
With only about 25 S&P 500 companies left to report, the consensus estimate for S&P 500 year-over-year earnings growth in the first quarter is -1.8%, up marginally last week and up 5 points over the past 5 weeks.
The 5 percentage points of earnings upside relative to expectations, led by the consumer discretionary sector, is unexpected. Profit margins will likely end higher quarter over quarter, something few saw coming.
Also impressive, the consensus estimate for S&P 500 Earnings Per Share (EPS) over the next 12 months was unchanged last week and has fallen just 1% since March 31, less than the more typical 3% drop during reporting season.
Consistent with reassuring results, only about 1 in 5 S&P 500 companies reporting results mentioned the word “recession” on their first quarter earnings conference calls - the lowest since 2021. About 55% of S&P 500 companies have mentioned “inflation” during earnings season, also the lowest since 2021 and down from over 82% at the peak in 2022.
Solid earnings results compared with expectations have helped keep stocks afloat in recent weeks amid debt ceiling jitters, regional bank concerns and news headlines discussing the "recession" topic. We are still in an earnings lull and a weak seasonal period for stocks. While many are expecting the Fed to pause in June, gains may depend on the continued resilience of the U.S. economy. The S&P 500 has had a very tough time breaking through the 4,200 chart resistance level, so we may be in for more choppiness from a technical perspective. If you have specific questions or would like to discuss your own investment strategy or financial planning needs, we welcome you to call us at 302.234.5655 or email us at email@example.com to set up time to discuss further.
*Source: LPL Research, CFRA FactSet 05/03/23A bear market is when a stock index or security closes 20% or more below a 52-week high. For this analysis, we take liberty with this and included 19%. All indexes are unmanaged and cannot be invested into directly. Past performance is no guarantee of future results. The modern design of the S&P 500 Index was first launched in 1957. Performance before then incorporated the performance of its predecessor, the S&P 90.
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