Earnings season kicks into higher gear
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After a hot fall, a spring tornado could wreak havoc in France
Barely half a year after this year’s French budget was passed, the wrangling over the 2027 budget is about to begin, but that’s not all, because France will also hold a presidential election next spring. During the first public presidential debate, some of the radical candidates put forward ideas that were, at times, unconventional. Although the presidential election in late April still seems far off, based on the latest polls, if no candidate secures enough votes and a runoff is held, it cannot be ruled out that two radical presidential candidates will face off against each other. Market participants may have begun to price in this growing uncertainty, as the yield spread between French and German 10-year government bonds has started to widen again in recent weeks. The period ahead promises to be full of twists and turns, so it will be worth keeping a close eye on developments in French domestic politics.
Commodities - Technical Analysis
Gold and silver prices have retested their uptrend lines, so the long-term trend may continue. Oil prices have broken out of a contracting pattern, which may signal the start of another upward wave. Natural gas prices have also begun to rise, signaling a buy. In the case of copper, the main uptrend remains in effect, and there are currently no signs indicating a change in the trend’s structure. Following significant gains, wheat and corn have become heavily overbought, increasing the likelihood of a correction.
Amid the Iran conflict, the first-quarter earnings season kicked off in the US last week. According to FactSet, the estimated earnings growth rate for the S&P 500 in the first quarter could reach 12.6%. In terms of the index sectors, the quarter may have closed with significant earnings growth in the technology sector, and market participants also expect strong, double-digit earnings growth in the materials and financial sectors. Earnings season will shift into high gear this week, with the latest reports from major overseas banks arriving first at the start of the week.
Amidst the Iranian conflict and the recently agreed-upon but seemingly fragile ceasefire, the first-quarter earnings season has just begun in the US. Overall, the companies in the S&P500 index could have ended the quarter on a strong note, earnings growth is expected to have been strongest among technology companies, while companies in the materials and financial sectors also likely saw double-digit quarterly earnings growth.
With the rebound following the March decline, the S&P 500 has now managed to recoup part of its earlier losses. For the S&P 500, the year-end analyst price target is currently 7,457 points, while the median forecast in January was 7,550. Looking at current expectations, Oppenheimer’s year-end target of 8,100 points is the highest, while BCA’s is the most pessimistic (6,375); the majority of price target expectations fall within the 7,300 to 7,700 point range. This year’s annual EPS expectations for the index are 0.69% higher than the median earnings expectations from January.
Earnings season kicked off in the US last week with Delta Air Lines’ results. Although Delta’s first-quarter revenue and profit both exceeded consensus estimates, the company now expects adjusted EPS of $1.00 to $1.50 for the second quarter, instead of the analyst’s forecast of $1.45; according to the company, rising jet fuel prices in the wake of the Iran conflict will increase costs by more than $2 billion in the June quarter. Due to uncertainty regarding the duration of the rise in fuel prices, the company has not yet released an updated annual forecast. According to the airline, despite the uncertainty, bookings were generally strong in the premium and business travel segments, as well as for transatlantic flights. This week, the earnings season will continue with earnings reports from major US banks: Goldman Sachs will report on Monday, Citigroup and JPMorgan on Tuesday, followed by Morgan Stanley and Bank of America on Wednesday.
As of noon on Monday, approximately 4% of S&P 500 companies have released their latest earnings figures so far. The 18 companies that have already released their earnings reports reported revenue that was, on average, 3.9% above expectations, while in terms of EPS, the companies that have already reported posted results that were, on average, 17.4% above expectations.
Looking at the S&P 500 index, the estimated earnings growth rate for the first quarter is 12.6% (year-over-year) according to FactSet, which is higher than the ten-year average earnings growth rate of 10.3%. Among the index components, 51 companies have issued negative EPS forecasts for the first quarter, while 58 have issued positive ones. The estimated earnings growth rate for the S&P 500 index for the full year is expected to be 17.6%.
Looking at the eleven sectors of the S&P 500, eight sectors are expected to see earnings growth (year-over-year) in the first quarter, led by the technology, materials, and financial sectors; based on current expectations, three sectors may see a decline in earnings for the quarter. Earnings growth in the technology sector could be very strong at 45% in the first quarter, while within the sector, companies in the semiconductor industry are expected to see the largest earnings growth (95%, year-over-year).
S&P500 technical picture
In the short term, the index has broken through and may have re-entered the zone that previously acted as resistance. 6875 could be an important resistance level, and the uptrend line will soon be at 6562. The index may move within this range in the short term. Later, if it breaks the uptrend after turning down from a lower high, a more significant change could occur.
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