Companies are reporting solid earnings growth for the fourth quarter with profits showing an increase of 14.1 percent on a year-over-year basis, according to FactSet. However, the outlooks accompanying those earnings reports are not as rosy. Because of those poor forecasts, earnings for the first quarter of 2019 are expected to drop more than 1 percent, according to FactSet. That’s the first year-over-year decline in earnings in more than two years.
“The market is pricing in a down Q1 but they’re pricing in a positive Q2 and Q3,” said Andrew Slimmon, managing director at Morgan Stanley Investment Management. “The risk is that Q2 slips to zero and now you’re talking about two consecutive quarter of negative earnings growth, which is technically an earnings recession.”
“The reason why the market has not focused on this yet is there was such an overwhelmingly high level of bearishness at the beginning of the year,” Slimmon said.
The S&P 500 snapped a five-day winning streak on Wednesday following the release of mixed quarterly results. Equities are still up sharply for the year, however, following the market’s best January performance in three decades.
“The market had an unbelievable run,” said Larry Benedict, founder of The Opportunistic Trader. “You have to respect the move. It’s been real and across all sectors. But it’s due for a little bit of a pullback.”
Shares of BB&T and SunTrust Banks bucked the overall negative trend, gaining 4 percent and 10.2 percent, respectively. The two stocks rose after BB&T agreed to buy SunTrust for more than 28 billion. The deal — the biggest in a decade within the banking sector — creates a $66 billion company and the sixth-largest U.S. bank by assets. The SPDR S&P Regional Banking ETF (KRE) rose 1.5 percent.
from Update News Zone http://bit.ly/2MWk6Js
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