Earnings recession risk increases as a flood of warnings hit

The S&P 500 looks set to suffer its first earnings recession in three years, as the number of companies cutting guidance is among the highest seen in the past 13 years.

Adding to the negative outlook, 113 S&P 500 companies have issued EPS guidance as the second quarter ended, with 87 companies, or 77% of that total, providing guidance that was below the average estimate of analysts. That is well above the five-year average of 74 companies that warn of earnings misses, and the second most since FactSet began tracking data in 2006.

The last time the S&P 500 suffered an earnings recession was the second quarter of 2016, when earnings declined for four straight quarters.Among sectors, materials is set to be the worst earnings performer, with the blended growth estimate currently showing a negative 16.84%, FactSet said. The sector expected to grow EPS the most is health care, but the blended estimate is currently just 2.12%.

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