Q2 earnings season preview: S&P 500 sits at one-year highs
Q2 earnings season preview: S&P 500 sits at one-year highs
Earnings decline expected to continue in Q2
The US 500 index is expected to have a decline in earnings for the second quarter of 2023. This means that the companies in this index are projected to make 9.4% less profit compared to the same time last year. The decrease in earnings is mainly due to a decrease in revenue and a consistent decline in profit margins over the past six quarters.
This upcoming quarter will mark the third consecutive quarter of earnings declines for the S&P 500 index. In the first quarter of 2023, earnings dropped by 3.5%, and in the fourth quarter of 2022, there was a 5.4% decrease in earnings.
Although earnings estimates for the second quarter have decreased since the beginning of the quarter, the reductions are not as significant as in previous periods. At the start of the quarter, the expected decline in earnings was 7.2%, but it has now been revised to 9.4%.
Signs of strength in tech and other sectors
Since the start of the second quarter, the estimates for full-year 2023 earnings have only slightly decreased. Some sectors, such as Construction, Industrials, Autos, Retail, and Tech, have actually seen improvements in their earnings estimates. On the other hand, sectors like Energy, Consumer Discretionary, Basic Materials, Transportation, Conglomerates, and Aerospace have had their estimates reduced.
This is a positive trend compared to the previous year, where estimates were consistently decreasing. The overall earnings estimates for the S&P 500 index have only slightly decreased since April, and some sectors are even experiencing positive estimate revisions. These sectors include Construction, Industrial Products, Autos, Tech, Medical, and Retail.
In summary, the S&P 500 index is expected to have a decline in earnings for the second quarter of 2023. However, the magnitude of the decline is not as severe as in previous periods, and some sectors are actually seeing improvements in their earnings estimates.
S&P 500 – technical analysis
The S&P 500 continues to head higher as solid economic data and slowing inflationary pressures led to renewed risk-on sentiment last week.
The April 2022 high at 4,513 represents a possible upside target while last Friday’s low at 4,398 underpins on a daily chart closing basis.
Immediate support comes in around the 4,447 June peak.
This information has been prepared by IG, a trading name of IG Markets Ltd and IG Markets South Africa Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
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