During April, Wall Street was buoyed by strong earnings results from both banks and technology companies. The majority of the companies listed on the S&P 500 have reported first-quarter results with a large proportion reporting earnings ahead of expectations, according to FactSet. In a typical quarter, 66% of companies beat estimates, and 20% miss estimates. Over the past four quarters, 74% of companies beat the estimates, and 22% missed estimates.
In aggregate, companies are reporting earnings that are 8% above estimates, which compares to a long-term average surprise factor of 4%. The earnings beats have impressed investors, particularly among consumer discretionary, energy, banks, and big tech companies. Perhaps corporate earnings resilience helps explain why the US market has held up so well in the year to date, despite lots of pessimism about an impending recession.
Source: Deutsche Bank
The US economy grew by an annualised 1.1% in the first quarter, slowing from a 2.6% expansion in the previous quarter and missing market expectations of 2% growth. It was the weakest pace of expansion since Q2 2022, as business investment growth slowed down, inventories declined and rising interest rates continued to hurt the housing market. Latest estimates suggest growth in the second quarter will bounce back to around 1.8%.
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