Earnings Season Could Be Rough for an Expensive Stock Market
XM Group | Jan 12, 2023 03:24AM ET
Uncertainty
Equity markets started the new year on a strong note, but it’s questionable whether this optimism will last. Leading indicators such as business surveys warn that the US economy is losing steam, potentially heading into a recession later this year as demand is softening at a dramatic pace.
Heading into this earnings season, investors are concerned that this negativity in the leading indicators might be reflected in corporate results or downbeat guidance by management teams for the next quarters. Earnings estimates by analysts remain quite high, raising concerns that they are out-of-sync with economic reality and vulnerable to downside revisions.
Charts paint a similar picture. The S&P 500 is still trading below the downtrend line drawn from its record high and also below its 200-day moving average, keeping the index in a clear downtrend. Those two obstacles have converged around the 3,990 region, which might act as resistance to any advances.
The earnings show will kick off with the big US banks on Friday, which are often seen as bellwethers for the broader economy, elevating the importance of their results. Highlights in the following week include Netflix (NASDAQ:NFLX) and Procter & Gamble on January 19, before the spotlight turns to Microsoft (NASDAQ:MSFT) and Tesla (NASDAQ:TSLA) on January 24 and 25, respectively.
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