With the estimates for the earnings of the first quarter have gone down since October, even though S&P 500 has gone up, the start of the earnings season will mark the outlook of the markets for the months to come. Whether the downfall of the S&P from its 4 year high is an indicator of further declines to follow if results are disappointing or the tardy growth is priced into the markets will be the key assessment factor for the investors in coming few weeks.
The earnings will provide an insight into the performance of the companies in middle of fresh concerns looming in Europe and mixed data being projected in indications. If the results are positive, the bullish trend of the last few months is set to continue, but a negative data could result in catalytic declines.
Pricing action could see a downward trend along with earnings revision if spending by consumers doesn’t hold up or the orders drop but if the business is sustaining amidst the apprehensions in the markets, then that could be very encouraging information for the stocks.
As compared to the earnings growth data of the fourth quarter which stood at 9.2 %, the earnings of the S&P 500 in the first quarter are rising only at 3.2 %. While there was a spring of 19 % in earnings growth in first quarter last year, no such thing is expected for the current quarter.
The estimates have been trimmed continuously over the past few months , but a decreased rate off late which might signal leveling off with increases in the month of March. But it just maybe that analysts have grown over cautious with the skepticism in the markets, and even the corporate management teams were seen setting the expectations pretty low. Material and telecom have seen the most declines in their estimates.
Bank of America has been reported to have told its clients that it was still too early if they were to give a positive signal for the short term given the worries prevailing regarding sales revision and guidance. SanDisk has also warned of its revenue and margins taking a hit because of low demands after which the stock of the makers of chip and flash –memory plummeted.
Google Inc., Wells Fargo & Co. and JPMorgan Chase & Co. are all set to post results at the start of the earnings season. Given the downside trends the market could also surprise with an upside turn but the demands are to sag after a warmer than expected winter and nor can one expect the burst at present to last for a very long time.