Emily Powell on LinkedIn: The Profits Stocks Prophesized (2024)

Stocks continued their slide last week despite mostly better-than-expected earnings results. While earnings surprises were generally positive, investors were troubled by declines in year-over-year net profit margins and tepid earnings guidance. Particularly hard hit were technology companies, following mixed earnings results.

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Stocks Climb as US Earnings Kick Into High Gear: Markets Wrap‘Mag Seven’ results arrive with equities at critical momentS&P 500 malaise to be rescued by strong profits: MLIV PulseBy Rita Nazareth(Bloomberg) -- Stocks rebounded after a $2 trillion selloff, with investors hanging their hopes on whether big tech will meet the lofty expectations for artificial intelligence during the busiest week of the earnings season.About 180 companies in the S&P 500 — representing over 40% of the gauge’s market capitalization — are due to report their results this week. Stakes are high for the “Magnificent Seven” megacaps, whose profits are forecast to rise nearly 40% from a year ago, according to Bloomberg Intelligence. The focus on earnings comes after a rout fueled by geopolitical fears and signals the Federal Reserve will be in no rush to cut rates.Strategists at Wall Street’s top banks are split on whether companies can deliver on robust forecasts. While Morgan Stanley’s Michael Wilson said he expects profit growth to improve as the economy strengthens, his counterpart at JPMorgan Chase & Co., Mislav Matejka, argues that hot inflation, a stronger dollar and geopolitical tensions are clouding the outlook.Nearly two-thirds of 409 respondents in Bloomberg’s Markets Live Pulse survey said they expect earnings to give the US equity benchmark a boost. That’s the highest vote of confidence for profits since the poll began asking the question in October 2022.The S&P 500 topped 5,000 — halting a six-day rout. The Nasdaq 100 rose 1%, with Nvidia Corp. leading gains in big tech. Apple Inc. was named a top pick for 2024 at Bank of America Corp. on optimism over its upcoming results.Treasuries wavered ahead of a flurry of bond auctions that will test investors’ appetite after yields hit the highest in 2024.

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This Graph Suggests US Stocks Are Ready To Rumble 🚀Well-practiced investors and pundits alike were expecting a rough period for US company profit, with some expecting it to slice in half like during the 2008 financial crisis. But now that the first-quarter numbers are firmed up, it looks like they were getting ahead of themselves: corporate America pulled off results that were far less severe than expected – and most importantly, the outlook for the future is looking healthier. Analysts now expect companies’ profit to be marginally higher this year than last, and forward-looking estimates are back on the up too.Take a look at data analytics firm FactSet’s chart: it shows Wall Street analysts’ one-year forward earnings-per-share estimates for the S&P 500 (dark blue line) plotted against the price of the S&P 500 index (light blue line). Notice that after a period of falling estimates, the line is moving higher. That’s a big deal: it tends to pull stock prices higher. Remember, too, that firms and analysts tend to err on the side of caution with their expectations, so company profit could well shoot past those predictions. That would lead to even higher estimates – something known as the beat-and-raise earnings game, a favorite pastime for Wall Street forecasters.If that beat-and-raise game gets into full swing, it bodes well for US stocks. And sure, there are plenty of risks in the market: a big one being that the S&P 500 has been driven by a small number of artificial-intelligence-linked superstars. But that AI theme will likely only grow broader and stronger. And given that US profit performance has been impressively resilient too, the S&P 500’s valuation – currently close to its five-year average of an 18.3 price-to-earnings (P/E) ratio – doesn’t look overly expensive. https://lnkd.in/eVb969K4

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19 stocks that thrive despite S&P 500′s diveRead what they found:The S&P 500 index has grappled with a sharp decline of just over 6 per cent since its September high amid rising interest rates which have sent shockwaves through financial markets. Our stock screen has identified a select group of U.S.-listed companies that appear to be defying the odds. Even in the face of the broader market’s challenges, these stocks continue to outperform the S&P 500.https://lnkd.in/gmWbKZHY

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Stocks continued their upward trajectory in early 2024.The S&P 500 returned more than 10% for a second consecutive quarter, setting multiple new all-time highs along the way. Notably, this quarter saw a significant shift in sentiment, as investors now only expect three interest rate cuts this year as compared to six at the start of the year.This change in expectations came as inflation progress slowed and the U.S. economy continued to expand despite higher interest rates, both of which signal a need for fewer rate cuts.Click below to read more!👇https://lnkd.in/ey8-pqv4

After a strong first quarter for stocks, some April showers rained down as the S&P 500 fell about 4% last month. Hopefully those showers will bring some flowers in May, despite the widely cited stock market adage, “Sell in May and go away.” There is some merit to this old adage because the S&P 500’s best six-month returns have, on average, come from November through April, and its worst between May and October (recall bear markets often end in October). Still, historically the index has gained an average of 1.8% from May through October — hardly worth avoiding. While stocks have delivered solid gains this year, the steady growth of the U.S. economy alongside rising corporate profits increase the chances of more gains ahead. Last week’s data on gross domestic product looked soft on the surface, as the U.S. economy grew just 1.6% in the first quarter. But inventories and trade masked strong underlying consumer and business demand. Consumer spending rose at a solid 2.5% pace, while capital investment rose 2.9%. Economists looking for a slowdown keep asking: are we there yet? The economy may slow later this year, but we’re not there yet. So, what caused stocks to dip? Beyond some digestion of strong gains through March, stubborn inflation and higher interest rates were the main culprits. As the downtrend in inflation has stalled recently, expectations for the start of the Federal Reserve’s rate-cutting campaign have been pushed out. With the Fed’s preferred inflation measure stuck near 3%, markets now expect one, or possibly two rate cuts this year, down from near six at the start of the year. Expect inflation to ease later this year as demand likely slows, but patience will be required. If you’re concerned about a bigger slide, the numbers during corporate earnings season — now more than half complete — may be reassuring. A solid 80% of S&P 500 companies have beaten earnings estimates so far this quarter, with more than 8% average upside relative to estimates. Results from the big technology companies have mostly exceeded high expectations. And perhaps the most important earnings measuring stick, estimates have moved higher and provide evidence of upbeat guidance from corporate managements. With the economy growing steadily and corporate profits rising, the near-term outlook for stocks still looks supportive. As always, there will be rainy days. Sticky inflation remains a thorn in the market’s side and geopolitics are a potential stumbling block. But for markets, expect more flowers than showers in May and potentially beyond. As always, this article is purely for academic discussions, there is no intention to offer any investment advice.

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Are U.S. stocks poised to continue their dramatic run, or is a pause ahead? That’s the question investors are asking as the S&P 500 heads into the close of the year with a fresh record high coming into view.

After a strong first quarter for stocks, some April showers rained down as the S&P 500 fell about 4% last month. Hopefully those showers will bring some flowers in May, despite the widely cited stock market adage, “Sell in May and go away.” There is some merit to this old adage because the S&P 500’s best six-month returns have, on average, come from November through April, and its worst between May and October (recall bear markets often end in October). Still, historically the index has gained an average of 1.8% from May through October — hardly worth avoiding. While stocks have delivered solid gains this year, the steady growth of the U.S. economy alongside rising corporate profits increase the chances of more gains ahead. Last week’s data on gross domestic product looked soft on the surface, as the U.S. economy grew just 1.6% in the first quarter. But inventories and trade masked strong underlying consumer and business demand. Consumer spending rose at a solid 2.5% pace, while capital investment rose 2.9%. Economists looking for a slowdown keep asking: are we there yet? The economy may slow later this year, but we’re not there yet. So, what caused stocks to dip? Beyond some digestion of strong gains through March, stubborn inflation and higher interest rates were the main culprits. As the downtrend in inflation has stalled recently, expectations for the start of the Federal Reserve’s rate-cutting campaign have been pushed out. With the Fed’s preferred inflation measure stuck near 3%, markets now expect one, or possibly two rate cuts this year, down from near six at the start of the year. Expect inflation to ease later this year as demand likely slows, but patience will be required. If you’re concerned about a bigger slide, the numbers during corporate earnings season — now more than half complete — may be reassuring. A solid 80% of S&P 500 companies have beaten earnings estimates so far this quarter, with more than 8% average upside relative to estimates. Results from the big technology companies have mostly exceeded high expectations. And perhaps the most important earnings measuring stick, estimates have moved higher and provide evidence of upbeat guidance from corporate managements. With the economy growing steadily and corporate profits rising, the near-term outlook for stocks still looks supportive. As always, there will be rainy days. Sticky inflation remains a thorn in the market’s side and geopolitics are a potential stumbling block. But for markets, expect more flowers than showers in May and potentially beyond. This article is purely for academic discussions. There is no intention whatsoever to offer any investing advice.

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Our Midyear Outlook features a lot of valuable information, this week we are looking at all things stocks. The outlook for stocks in the second half of 2023 points to modest gains with potential bumps along the way. Earnings are expected to decline, but solid revenue growth and stable profit margins may help mitigate the magnitude of the decline. Valuation debates exist, with some arguing that the stock market is overvalued, while others believe current valuations are justified given low long-term interest rates.Want to learn more? Click below to become up to date:https://lnkd.in/eWaRVVVj

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