U.S. companies face biggest decline in profits since COVID-19 shutdowns

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Companies on the S&P 500 index are expected to report a 6.8 per cent decline in first-quarter earnings compared with the same period a year earlier, according to estimates

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That would be the biggest fall since the more than 30 per cent plunge in the second quarter of 2020, which came as the rapid spread of COVID-19 led to a widespread economic shutdown. “When you look at the cost of wages and the cost of capital, margins are coming under a fair amount of pressure,” says Jack Ablin, chief investment officer at Cresset Asset Management LLC.

Falling interest rate expectations have boosted the appeal of some of the biggest technology companies, a development that has masked a more lacklustre performance from the wider stock market. More companies than usual signalled weakness in the first quarter, with 78 issuing negative guidance on their earnings per share – an indication that management expects to miss analysts’ forecasts – exceeding the five-year average by 37 per cent. The semiconductors industry, a part of the broader information technology sector, provided 11 such warnings.

New orders for durable goods in the U.S. fell for the second month in a row in February, while analysts had expected a rebound in buying.

 

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