S&P gains under threat as banks, energy earnings outlook grows dim
Peak inflation presents huge risk for financial and energy sectors, the profit growth of which is forecast to account for 50% of the S&P Index’s overall profit growth
There are new signs that financial and energy companies will be hard pressed to meet earnings targets, as US Treasury yields revert to levels not seen since 2016, and oil prices begin to slip, reports Bloomberg.
“The rolling over of inflation expectations and commodity prices presents unique risks for sectors that were large contributors to better earnings expectations,” Bloomberg quotes Alex Bellefleur, of Pavilion Global Markets as saying. Bellefleur adds that “the risk is that markets begin to reassess the forward earnings picture and turn a little less optimistic.”
Any sign that earnings growth will likely miss targets that have already been priced into stocks would remove a huge driver of gains seen over the past six months.
There are also signs that oil industry profit gains are slowing down, with the price of crude falling more than 4% on Wednesday, after failing several times to climb past US$55 a barrel in April.