U.S. stocks declined to close a choppy session slightly lower on Monday as investors returned from a holiday weekend and geared up for another busy week of corporate earnings results.
The S&P 500 edged lower after fluctuating between gains and losses throughout the session. The Dow and Nasdaq also ended in the red. Treasury yields advanced, with the yield on the benchmark 10-year note holding above 2.8%. U.S. West Texas intermediate crude oil futures rose and extended last week’s gains.
For equity investors, earnings season will remain in focus this week as a number of major companies including United Airlines (UAL), American Express (AXP), Netflix (NFLX) and Tesla (TSLA) each report their latest quarterly results. These will come on the heels of last week’s mixed big bank earnings, with a number of firms including Morgan Stanley, JPMorgan Chase and Goldman Sachs topping some major metrics while warning of near-term uncertainty due to inflation and the ongoing Russia-Ukraine crisis.
So far, about 7% of S&P 500 index components have reported actual Q1 results and 77% of these have topped Wall Street’s earnings per share (EPS) estimates, matching the five-year average percentage of beats, according to data from FactSet. Heading into this week, the estimated earnings growth rate for the S&P 500 stood at at 5.1%. If maintained, this would mark the lowest earnings growth rate for the index since the fourth quarter of 2020.
Some strategists have also suggested investors brace for weaker profit growth this quarterly reporting season, as companies grapple with decades-high rates of inflation, lingering supply chain challenges and geopolitical turmoil.
“I do think that we’re potentially in for a tough earning season, only because when people gave guidance [last quarter], the input costs have clearly gotten worse than they expected,” Rhys Williams, Spouting Rock Asset Management chief strategist, told Yahoo Finance Live. Williams added that many companies last issued guidance before the Russia first invaded Ukraine in late February and further stirred up disruptions to supply chains and global markets.
“So you have further increases in costs. And then at the same time, the consumer has gotten a little rockier in the month of March. So I expect that there will be some revenue misses,” Williams added. “That’s probably a sign that there’ll be somewhat negative earnings surprises, certainly much more than compared to the last four or five quarters, where the earnings news has been just fantastic.”
