Analysts have been busy cutting their estimates as companies from Apple Inc. to Delta Air Lines Inc. and Macy’s Inc. issued sales or profit warnings. At 12 percent, fourth-quarter profit growth from S&P 500 firms is expected to slow to half the pace from the previous three months, data compiled by Bloomberg show. The deceleration will worsen this year, with profits increasing no more than 4 percent in the first two quarters.
Marko Kolanovic, a strategist at JPMorgan, observed a pattern so far this reporting season, where individual stocks fell in initial reaction post earnings but managed to end the day higher. To him, it’s a sign that share prices may have reflected concerns over a profit slowdown. After the fourth-quarter sell-off that erased $5 trillion from equity values, almost all hedge funds tracked by the firm held exposure to stocks that’s well below the historic average.
“Risks around the upcoming earnings season are balanced,” he wrote in a note. “On one hand, we could see further downside for Q1 guidance, but on the other hand, already reduced expectations and low positioning can result in upside moves.”
This article provided by Bloomberg News.