NEW YORK (Reuters) – The growing ranks of stock market Eeyores now have another reason to stay glum: Next year’s profit picture is darkening fast.
Corporate earnings forecasts are eroding as the tailwind from the tax cut fades and as investors worry the U.S.-China trade dispute could upend global commerce more than it already has.
Correction - Year - Benchmark - S - P
Even after the second correction of the year for the benchmark S&P 500 stock index, many investors wonder whether share prices adequately reflect risks of slower profit growth.
Emblematic of the recent turbulence, last week the S&P 500 slid 4.6 percent. The previous week it notched its biggest weekly gain in nearly seven years.
Wall - Street - Analysts - Brakes - Estimates
Wall Street analysts have slammed the brakes on estimates for profit growth for S&P 500 companies, which had accelerated for much of the year. Two months ago, 2019 profit growth was pegged at 10.2 percent; it is now seen at 8.2 percent, and growing ranks of doubters reckon growth could slow to half that rate or less.
“It may be more in the line of 3 to 4 percent,” said Paul Nolte, portfolio manager at Kingsview Asset Management in Chicago, adding the market has yet to price that in.
Risk - Estimate - Downside - Equity - Market
“The risk to that estimate is the downside. Right now, the equity market is focused more on trade than they are earnings.”
Morgan Stanley’s outlook warned of more than a 50 percent chance of a “modest earnings recession,” or two quarters of year-over-year profit declines. That last occurred when earnings declined for four straight quarters starting in the third quarter of 2015.
Weeks - Strategists - RBC - Capital - Markets
In recent weeks, top strategists at RBC Capital Markets, BNP Paribas and Bank of America Merrill Lynch have forecast 2019 earnings per share growth below the rate compiled by Refinitiv, an aggregate of estimates from analysts covering individual companies.
Among the deepest profit downgrades have been for the technology...
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