US earnings set to be weakest since COVID-19 pandemic, Goldman strategists warn

Goldman Sachs strategists are predicting the most dismal earnings season since the height of the COVID-19 pandemic this quarter as an ongoing economic slowdown hammers top companies.

Analysts project that earnings per share results for companies listed in the broad-based S&P 500 will plunge by 7% in the first quarter compared to the same period one year ago, Goldman’s Lily Calcagnini and David Kostin said in a client note reported by Bloomberg on Thursday.

“If analyst projections are realized, this quarter will represent the trough in S&P 500 earnings growth,” the analysts said, adding that profit margins are likely to shrink given the tough conditions.

The latest round of corporate earnings will emerge as US companies weather concerns about the stability of the US banking sector and the Federal Reserve’s ongoing slate of interest rate hikes.

The Fed will hold its next policy meeting on May 2-3.

Investors will get their first round of major results on April 14, when BlackRock, Wells Fargo, JPMorgan Chase and Citigroup are all slated to report their quarterly earnings.

The Goldman strategists pointed to several key trends that Wall Street will be tracking closely during the uncertain period, including signs of a slowdown in cash spending, company initiatives in the burgeoning artificial intelligence sector, China’s effort to re-emerge from COVID-19 lockdowns and profit margins at US firms.

The experts see bank earnings jumping by 11% compared to last year, despite lingering “uncertainty” about the economic outlook.

US stocks have been resilient this year despite ongoing chaos in the wake of the failures of Silicon Valley Bank and Signature Bank of New York.

The S&P 500 is up nearly 7% since the start of the year, while the tech-heavy Nasdaq Composite Index has jumped by 15% over the same period.

The Dow Jones Industrial Average has been flat.

The Nasdaq 100, which tracks large-cap companies, entered bull market territory last month during a rally in tech stocks.