Updated: 2 days ago
The worst earnings season in years is about to begin, and it’s possible the stock market could shrug off the sharp profit decline, as long as companies see some signs of a recovery ahead.
Earnings are expected to fall by 44%, the worst quarterly performance since the Great Recession when S&P 500 profits fell by 67% in the fourth quarter of 2008, according to Refinitiv I/B/E/S data. It is also expected to be the worst quarter of the pandemic crisis, revealing the extent of the earnings damage as the economy slumped more than 30%. Major financials JPMorgan, Bank of America, Goldman Sachs and Wells Fargo are among the financial firms reporting. Pepsico starts off the week with its report Monday, and Johnson and Johnson,Abbott Labs and Netflix also report. The financial sector is expected to see a more than 52% decline in profits, according to Refinitiv. Stocks turned in a mixed performance in the past week, reacting at times to the rising risks to the economy as COVID-19 cases continued to increase in some states. The Dow posted a weekly gain of 0.96% while the S&P 500 and Nasdaq were up 1.76% and 4.01%, respectively.
In the week ahead, there are some important economic reports, including CPI inflation data Tuesday and retail sales Thursday. Last month, retail sales rose a surprise 17.7% but this month economists are watching closely to see if the reversal of some openings and the delays in other is impacting consumer spending. But it’s the earnings that could be a litmus test for markets.
