Quarterly Earnings Likely to Give Mixed Signals to Investors

“Ultimately, they’ll stop adding unproductive workers. There will be job losses, and they’ll restructure their businesses to be more efficient,” said Michael Arone, an investment strategist at State Street Global Advisors. “Because of the pandemic aftershocks and some of the things that are going on, this may take longer than it normally does.”

Investors will be particularly focused on the results and announcements from the large companies whose stocks have helped drive the market to its high.

Because of how stocks in the SP 500 are weighted, a relatively small number of large companies, including Microsoft, Apple and Amazon, are responsible for much of the index’s decline.

Those companies are important gauges for the economy when it comes to things like hiring and corporate spending, but they are also signals for how benchmark stock indexes will perform in the future. As large, international companies, they reflect the health of the global economy and the effect of a dollar at a two-decade peak.

There is yet another debate on Wall Street: Are most of the dire economic forecasts already reflected in the market?

The more optimistic analysts say stocks are starting to look attractively valued. At Monday’s close, the SP 500 was trading at 15 times what analysts expect companies in the index to earn next year, a multiple that is not particularly expensive. But if earnings — this quarter and into next year — come in below estimates, the market could fall further. For Liz Ann Sonders, the chief investment strategist at Charles Schwab, that’s the more likely outcome.

“I think the path of least resistance is still lower,” Ms. Sonders said.

Article source: https://www.nytimes.com/2022/10/12/business/wall-street-mixed-quarterly-earnings.html