![]() However, DataTrek Research co-founder Nicholas Colas says analyst earnings estimates have been trending in the wrong direction as of late. Analysts project S&P 500 earnings will grow 0.2% year-over-year in the third quarter and another 7.6% in the fourth quarter. The war in Ukraine and global commodity inflation sent energy prices soaring in 2022 and helped many oil and gas stocks generate record profits last year.įor now, analysts are anticipating S&P 500 earnings growth will rebound into positive territory in the second half of 2023. The Energy sector has been the biggest drag on S&P 500 earnings, reporting a 51.4% drop in profits in the second quarter on extremely difficult 2022 comparisons. S&P 500 earnings have dropped 5.2% year-over-year in the second quarter, the largest earnings decline for the market since the third quarter of 2020. Meanwhile, the S&P 500’s forward price-to-earnings ratio has crept up to 19.2, about 10% above its 10-year average of 17.4. S&P 500 companies reported their third consecutive quarter of negative year-over-year earnings growth in the second quarter. avoids a recession, the S&P 500’s impressive rally in 2023 hasn’t been supported by underlying economic fundamentals. GDP growth in the second half of 2023 and into 2024. While FOMC officials are no longer calling for a recession, the latest Federal Reserve economic projections in June suggest a sharp drop in U.S. recession probability index, which still projects a 66% chance of a recession within the next 12 months. ![]() This risk is reflected in the New York Fed’s U.S. The higher the Fed is forced to raise interest rates to get inflation under control, the higher the likelihood of economic fallout at some point down the line. It may be very difficult for the FOMC to justify a pause on interest rate hikes until the jobs market cools down further. In his Jackson Hole speech, Powell said getting inflation back down to 2% will likely require “some softening in labor market conditions.” job openings hit 0.7 in July, its highest level since September 2021. has reported back-to-back months adding fewer than 200,000 jobs since the COVID-19 pandemic lockdowns in March and April of 2020. June and July represent the first time the U.S. economy added 187,000 jobs in July, missing economist estimates of 200,000. labor market is also showing signs of slowing down. Core PCE inflation, which excludes volatile food and energy prices and is the Fed’s preferred inflation measure, was up 4.2% in July, in-line with economist estimates and still well above the FOMC’s 2% long-term target.Īs prices continue to rise, the hot U.S. ![]() In addition to CPI inflation coming in below expectations, the personal consumption expenditures (PCE) price index was up 3.3% year-over-year in July, up from its 3% gain in June. In August, the Fed got mixed news in its efforts to navigate a “soft landing” for the U.S. The market is also pricing in a 59.5% chance the FOMC will cut interest rates from their current levels by May 2024. The bond market is pricing in a 44.4% chance the FOMC will raise rates by at least another 25 bps by November. “Investors still care what the Fed is going to do, but at this point given that they are either done raising rates or very close to being done raising rates, the underlying fundamentals of corporate profits are again the main focus.” “Not only is the Fed unlikely to raise rates at the next meeting, they are unlikely to raise rates again this year as long as inflation continues to remain contained.” Zaccarelli says. 20.Ĭhris Zaccarelli, chief investment officer at Independent Advisor Alliance, says each month inflation comes in below expectations, the likelihood the Fed has issued its last rate hike of the current cycle increases. Economists are expecting the FOMC to maintain interest rates at their current levels at its next meeting that concludes on Sept. In his annual speech at Jackson Hole in August, Powell said inflation is still “too high” and warned investors that “we are prepared to raise rates further.” Powell also said the combination of decelerating inflation and a solid economy will allow the Fed to “proceed carefully” at future meetings.Īt its last meeting in July, the Federal Open Market Committee (FOMC) raised interest rates by another 25 basis points (bps) to a new range of between 5.25% and 5.5%, its highest target range in 22 years. The headline CPI reading was also up just 0.2% on a monthly basis for the second consecutive month. The consumer price index gained 3.2% year-over year in July, down from peak inflation levels of 9.1% in June 2022 and below economists’ estimates of a 3.3% gain. Inflation, interest rates and the labor market will likely continue to dominate Wall Street headlines in September. ![]()
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |