Eager for soothing news, investors look to strong earnings
New York (Reuters): Anxious stock investors are hoping an unusually U.S. strong earnings season can restore some of the hopefulness that characterized equity markets last year.
Imploding technology stocks and fears of a trade war have pummeled the market in recent days. Given the gush in instability this year, there is no guarantee that worst is over.
Analysts predict strong results when reporting season starts up next month, with first-quarter S&P 500 profit growth on track to be the highest in seven years, according to Thomson Reuters data.
Strategists said, a healthy earnings period would bring back the focus on fundamentals and possibly put a floor under prices, supporting views that the 9-year-old bull market will go on.
Robert Pavlik, chief investment strategist and senior portfolio manager at SlateStone Wealth LLC in New York said, “It’s going to be earnings,”. “The market has given up so much that earnings can start to redirect attention back into a market that has gotten much cheaper relative to where we were.”
With this year’s sell-off and rising profit forecasts, stocks also are near the cheapest on a price-to-earnings basis that they have been since late 2016. The S&P 500 is trading at about 16.5 times forward earnings, well below the 18.9 level it was at in mid-December, according to Thomson Reuters data.
To be sure, next week brings the monthly U.S. jobs report, a potential catalyst for further volatility. A strong payrolls report in early February had helped spark the stock sell-off that drove the S&P 500 more than 10-percent below its Jan. 26 record high – a “correction.”
The job report in brief drove up bond yields and touched off doubts that the Federal Reserve may need to speed up interest rate hikes. The S&P 500 is now about 8 percent below its record.