Junk data may come from America – Economx.hu

The American stock market has done well so far this year, the S&P 500 stock index is a good 20 percent above its value at the beginning of January. This increased the total value of companies listed on American stock exchanges by more than 8 trillion (thousand billion) dollars, largely due to optimism about corporate profits and the initial easing of American monetary policy.

According to the analysts, in order for the good mood to remain, American companies must also continuously deliver good profit data, and therefore the rapid reporting season, which actually starts this week, is particularly important (among the smaller companies, some have already reported). However, there are ominous signs. According to FactSet data, analysts currently expect an average annual profit growth of almost 4.2 percent only from the companies included in the basket of the S&P 500 index. This is a significant decrease compared to the middle of the summer, on June 30 the experts were still counting on an average expansion of 7.8 percent. Moreover, if the more pessimistic scenario comes in, then a According to data from Bloomberg Intelligence this would also mean an annual low in profit growth.

By the way, in the last three months, analysts have downgraded the growth prospects of a total of 9 out of 11 sectors, while 60 companies gave negative and 50 positive profit warnings.

In particular, investors are looking to see if companies are delaying spending, if demand has slowed, and if geopolitical risks and macro uncertainty are causing buyers to behave differently. Precisely because so much is happening in the world, company results and forecasts will be especially important now, said Adam Parker, founder of Trivariate Research.

By the way, the downward revision of profit expectations exceeded the average, given that analysts increasingly believe in the slowdown of the American economy. In the past 5 years, analysts have adjusted their profit growth forecasts for the given three months by an average of 3.3 percent during the quarter, so the current figure of 3.9 percent reflects a more cautious attitude. However, this data may also give a greater chance for positive surprises. By the way, this was already indicated by the numbers of the smaller companies that have reported so far, 15 out of 21 have so far managed to report a higher than estimated profit.

Major company reports begin to arrive this week, with results from Delta Air Lines Inc. due on Thursday and JPMorgan Chase & Co. and Wells Fargo & Co. on Friday.

Bad data

Of the 11 examined sectors, the companies in the energy sector will report the expected poor data. Their combined result in the third quarter is expected to decrease by 20 percent compared to the same period last year. According to FactSet data, analysts expect a 2.7 percent decline in earnings from companies in the raw materials sector, and a 0.4 percent decline in the financial sector. Of course, the driving force will be the technology sector, where the market expects a 15.2 percent profit increase, and 10.9 percent in the healthcare sector.