Happy Friday eve, investors. |
Stocks are up, earnings look upbeat, and the case for the Fed to cut interest rates still isn’t strong. |
All this is to say Wall Street doesn’t seem to be sweating a recession anymore. |
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What recession? |
 | Made with AI by Opening Bell Daily |
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It seems like just yesterday a Wall Street analyst couldn’t open their mouth without saying “looming recession.” |
As earnings season winds down, that chatter has all but evaporated. |
A banner stretch for corporate America has extinguished concerns of an economic downturn — even though inflation isn’t cooling as anticipated, rate cuts are up in the air, and the labor market remains tight. |
According to FactSet, S&P 500 companies have largely crushed it to start the year, with more than three-quarters of names beating expectations. |
Earnings per share (EPS) for S&P 500 companies are up 5.2% compared to a year ago, squarely above the consensus forecast of 3.4%. |
If that holds, it would mark the strongest growth in roughly two years. |
To that point, the number of times the word “recession” came up on earnings calls and investor events has dropped from 302 a year ago to 100 this quarter, FactSet data shows. |
That also marks a two-year low. |
Usually, analysts will cut earnings estimates during the first month of a quarter by paring what’s called a bottom-up EPS estimate — the aggregate median EPS estimate for all the companies in the index. |
Over the last decade, the average decline in this bottom-up EPS estimate has been 1.8%, per FactSet. |
And with hot economic data, geopolitical concerns, and an uncertain political cycle, it would make sense to predict a steeper dip than usual this year. |
Yet over the month of April, Wall Street forecasters actually raised this figure by 0.7%. |
Analysts haven’t raised the bottom-up EPS estimate during the first month of a quarter since the end of 2021, FactSet’s John Butters said in a note. |
Even more strange is that this upward revision happened while the S&P 500 index actually fell by more than 4%. |
So, here’s a weird April recap: |
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The macro backdrop makes things even more confusing. |
The US is dealing with rising individual and corporate delinquencies, weak consumer sentiment, overseas tensions, and a central bank that can’t stamp out inflation. |
But consumers keep spending, layoffs haven’t spiked, and economic growth is still chugging along. |
Just yesterday, Goldman Sachs, for one, raised its second-quarter GDP estimate from 3.3% to 3.4%. |
What does all this add up to? |
For Wall Street, cushier profits. |
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*At a glance: |
 | *Data as of Wednesday 8:45 p.m. ET |
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Elsewhere: |
Shares of Arm plunged double-digits after hours. The semiconductor company gave a not-so-confident outlook for the fiscal year. It was met with a lukewarm reception from investors. (Bloomberg) The EU agreed to arm Ukraine using profits from Russian assets. The bloc of countries plan to use roughly $3.22 billion in profits from Russia’s frozen state assets to buy weapons for Ukraine. (FT) April saw the most corporate bankruptcies in a year. Companies are feeling the burden of high interest rates. Last month brought 66 new bankruptcy filings, up from 61 in March. (S&P Global)
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Rapid-fire: |
The US stalls its weapons shipment to Israel (WSJ) Robinhood reported quarterly record revenue of $618 million, beating estimates (Barron’s) “Bond King” Bill Gross says bond funds are now dead (Bill Gross’s website) Home sellers are facing a summer from hell (Business Insider) The rise of single-stock ETFs show the allure of leveraged risk (WSJ)
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Last thing: |
 | Barchart @Barchart |  |
| Chinese Stocks rallied for their 10th consecutive green day on Monday, their longest winning streak since January 2018 |  | | | May 7, 2024 | | | |
| | 414 Likes 99 Retweets 16 Replies |
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