U.S. earnings season fears revenue growth gains
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S&P 500 companies will report in the next few weeks. Last year, profits grew by more than 20% as a result of tax reform, so it may be difficult to compare this year's figures with last year's.
But Refinitiv IBES data show that as costs rise, partly because of tariffs, analysts expect profit margins to fall by 1.1 percentage points, the first time in at least two years that they have seen a decline over the same period last year.
"Businesses are feeling higher input costs, and mild wage increases also increase labor costs," said Kristina Hooper, chief global market strategist at Invesco in New York.
The first quarter earnings of the S& P 500. SPX component stocks are expected to fall 2.5% from the same period last year, which will be the first quarterly earnings decline since 2016. Meanwhile, revenue is expected to grow by 4.8%.
The cost of raw materials such as aluminium has increased as the United States imposes tariffs on imports from China and other countries.
First-quarter results are crucial to the sustained success of the bull market, and some investors believe that performance will either push the stock market to a record high or dampen the current rally.
The stock market has rebounded from its decline at the end of 2018, boosted by optimism about a trade agreement between China and the United States and expectations that the Federal Reserve will not raise interest rates again in the near future.
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