Wall Street Braces for a Weak Earnings Season

Energy and financial companies may be among the hardest hit, according to Mr. Klement, with the finance sector likely to see earnings per share fall 12 percent year-on-year. On Friday, investors will be closely watching for this when a parade of banking giants, including JPMorgan Chase, Wells Fargo and Bank of America, report fourth-quarter results.

The banks will provide insight into the health of companies and consumers — and the labor market, too. Slowdowns in deal-making, public offerings, and corporate and mortgage lending are eating into banks’ bottom lines.

Bonuses are on the block, too. Payouts at Wall Street’s largest banks are expected to drop as much as half from last year.

There are glimmers of hope after this quarter. If the Fed begins to ease up on interest-rate increases, leading to falling bond yields, stocks could rebound in the second half of the year. Equity prices are historically 10 times more sensitive to bond yields than they are to earnings, Mr. Klement said.

If that holds true, he said, “there’s a possibility we see quite a rally — if not the end of the bear market in 2023.”

Article source: https://www.nytimes.com/2023/01/09/business/wall-street-braces-for-a-weak-earnings-season.html