When U.S. reserves posted their worst December since the Great Depression, traders put plenty of the blame on actions by the Federal Save and that other favorite scapegoat, computerized trading.
But it now seems clear that the market was mostly anticipating what has literally happened in recent days: companies are cutting profit forecasts and trying to temper expectations for earnings growth this year after a big 2018.
On the to begin day of trading in 2019 last week, Apple warned that its fiscal first-quarter sales wouldn’t be as high as earlier projected and said its profit margin would be ever so slightly narrower than forecast. The Nikkei Asian Study reported this week that Apple is cutting its iPhone production by 10 percent for the next three months.
It is numerous of the same for other companies. Beverage giant Constellation Brands said Wednesday that its fiscal 2019 earnings per allocate would be $9.20 to $9.30, down from the range of $9.60 to $9.75 it forecast earlier. The company said it expects enervated sales in its wine and spirits business next quarter.
And homebuilder Lennar said Wednesday that it would keep in a holding pattern putting out a 2019 forecast because of “softness” and “uncertainty” in the housing sector.
Interest rate hikes by the Fed have aided to weaker demand for mortgages and home purchases, but there are other reasons for the late-2018 market decline. Maneesh Deshpande, stop of U.S. equity strategy at Barclays, outlined several factors in a note Tuesday, including U.S. political turmoil — the federal guidance is in week three of a partial shutdown — a weakening Chinese economy and bearish sentiment by retail investors.
Barclays cut its S&P 500 payment target for 2019 to 2,750 from 3,000, still up 6 percent, and lowered its projected S&P EPS to $171 from $176.
Morgan Stanley’s Michael Wilson, also a chief U.S. fairness strategist, told CNBC on Tuesday that he has left his S&P price target unchanged at 2,750. “All of the things that we’ve been troubled about, the market’s been worried about all year, are now starting to come to the fore.”
Samsung Electronics warned Tuesday of lower-than-expected profit in the fourth place, which is soon to be reported, because of rising economic uncertainties. Last month, logistics company FedEx decreased its 2019 earnings outlook and said it would have to cut costs because of a global economic slowdown.
For the fourth area, which for many companies ends in December, 72 S&P 500 companies have issued earnings warnings, twice as sundry as have issued positive guidance, according to FactSet. Earnings growth rates have been revised deign by companies in all 11 S&P sectors.
It’s possible the S&P could have earnings growth of more than 15 percent for the fourth lodgings, but that would be below the 25 percent notched for each of the previous three quarters, FactSet research bruit about.
And analysts are now looking for single-digit earnings growth for the next three quarters of this year. While fourth-quarter 2018 earnings excrescence is projected to be 11.4 percent, the first-quarter projection is for 2.9 percent growth, then 3.7 percent in the second accommodations and 4.3 percent in the third.
“In the last three months of 2018, markets were pricing in no earnings growth, and conceivably even negative growth, in 2019,” said Earnings Scout’s Nick Raich. “The good news is that bazaars likely overshot just how much 2019 EPS estimates were going to drop.”
Stocks have rebounded so far in 2019 as investors make amends move aside a bet that the bad news yet to come this earnings season is priced in. We’ll just have to see.