Forecasts for second-quarter U.S. earnings still look gloomy after a much-better-than-feared first quarter season as the likelihood of further interest rate hikes this year creates more potential risks for companies.
Fourth-quarter 2022 earnings for S&P 500 companies declined 3.2%, so a first-quarter profit fall would have been a second straight quarterly decline, which some strategists call an earnings recession. The last one occurred when COVID-19 hit corporate results in 2020. Higher interest rates mean higher borrowing costs for businesses and consumers, and investors have been worried that an extended tightening cycle could push the U.S. economy into recession. Other central banks, including the Bank of England this week, have hiked rates amid worries about global inflation.