Dour Earnings Loom Over Wall St. as a Slowing Economy Bites

If companies can’t pass on costs as easily, they are likely to become more conservative in their decision making, pulling back from spending and potentially laying off workers, slowing the economy.

“We have lived with higher-than-normal interest rates for another three months, at a time when economic activity has slowed. What has been the effect of that?” said James Masserio, co-head of equities for the Americas at Société Générale. “That is going to be front and center for people.”

While the overarching expectation is for a decline in profitability, the outlooks for different sectors of the stock market vary widely.

Materials companies, like mining businesses and commodities manufacturers, are expected to show that their earnings have fallen by about a third from the beginning of 2022, according to the FactSet data, as fears over a slowdown in global growth have sapped demand for an array of commodities like copper and aluminum.

Communications and technology companies are also expected to report sharp declines in earnings. At the other end of the spectrum, big oil producers like Exxon Mobil and Chevron are expected to report double-digit earnings growth for the fifth consecutive quarter, and industrial companies for the eighth straight quarter, with global demand offsetting a decline in prices.

Article source: https://www.nytimes.com/2023/04/13/business/earnings-reports-stock-market.html