As the S&P 500 index eked out gains in the first quarter, analysts and dozens of companies grew more pessimistic about their earnings by almost the same percentage as higher prices and fissures in the banking system sharpened fears of a downturn.
Analysts have also cut their first-quarter estimates on the bottom line at a steeper rate than average. From Dec. 31 to March 30, analysts lowered their earnings-per-share estimates by 6.3%. Analysts typically temper those forecasts over a given quarter as financial realities emerge, but in the past five years, that average decline during a quarter has been only 2.8%, FactSet said.
Then regulators swooped in to protect deposits at Silicon Valley Bank and Signature Bank after they collapsed last month, while the nation’s biggest banks gave First Republic Bank FRC a multibillion-dollar infusion. Abroad, Credit Suisse Group AG CSGN struck a deal to borrow up to $54 billion from the Swiss central bank.Not everyone agrees when, or if, a recession might hit, and whether a rebound might arrive in the second half of the year.
However, despite the banking ruptures, Wall Street has remained blasé on the potential impact on financial-industry profits. FactSet expects earnings from the financial sector to grow 3.2% during the first quarter. And it expects the sector to lead the S&P 500 overall on revenue growth, with gains of 9.1%.