Make or break earnings season for $10 trillion global stocks rally
A near-$10 trillion rally for global stocks this year will face a make-or-break moment as hundreds of companies report earnings over the next few weeks.
S&P 500 firms are expected to post a 9% drop in profits in the second quarter, making it the worst season since 2020, according to data compiled by Bloomberg Intelligence. In Europe, it may be even worse, with a projected 12% slump. But with the bar already low — and some indicators suggesting an earnings recovery next year — strategists are split on how the market will react.
“I’m skeptical companies will be able to demonstrate the same degree of earnings resilience this quarter,” said Evgenia Molotova, senior investment manager at Pictet Asset Management. “Top-line growth and margin stability will be key to seeing whether profits will be able to rebound in the second half.”
Areas of focus for market watchers include the impact of a slumping dollar on big exporters to the US, the substance behind the artificial intelligence buzz that powered the stock rally this year, and clues about how much firms are being affected by higher costs and a consumer squeeze.
Here are five things investors are watching:
The frenzy around AI spurred the technology-heavy Nasdaq 100 to its best ever first-half. Now, investors will be looking for evidence of the earnings implications of the nascent technology.
“If enthusiasm for AI fails to adequately materialize in technology companies’ earnings, we could experience at least a temporary correction in share prices,” said Aneeka Gupta, director of macroeconomic research at WisdomTree.
The biggest technology stocks — Apple Inc., Microsoft Corp., Amazon.com Inc., Nvidia Corp. and Google-parent Alphabet Inc. — are expected to post the best
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