S&P 500 companies’ quarterly financial results have been mixed so far in the current reporting cycle, with signs of both “strength and softness,” Oppenheimer Asset Management said Monday.
The brokerage said that 228 companies in the benchmark equity index have already reported results in the ongoing season, with earnings up 3.4% year over year overall on the back of a 3.9% increase in revenue. Eight of the 11 sectors have showed positive earnings growth, led by a 41% surge in communication services. Healthcare is leading the decliners, down 36%, followed by energy and materials posting double-digit declines, the firm said in a note.
In terms of sales growth, 141 companies have reported positive results, while 75 have logged negative results. Technology and communication services sales are up more than 8% each on an annual basis, while utilities, energy and materials are down, according to the note.
Microsoft (MSFT), Facebook parent Meta Platforms (META), and Google parent Alphabet (GOOG, GOOGL) reported results last week, with all three topping Wall Street’s views. “Soured market sentiment lessened on the back of better-than-expected earnings from a number of widely held large-cap names that included upside surprises in results reported by several members belonging to the group previously known as ‘the Magnificent Seven’,” Oppenheimer Asset Management Chief Investment Strategist John Stoltzfus said.
Apple (AAPL), Amazon.com (AMZN), Eli Lilly (LLY), McDonald’s (MCD) and Pfizer (PFE) are among the notable companies scheduled to report later this week. “At this midpoint in the season, 80% of firms have beaten analyst estimates,” Stoltzfus said.
Oppenheimer continues to be positive on equities and sees fixed-income securities as “complimentary to stocks in providing portfolio diversification,” according to the note.
The Federal Reserve’s monetary policy committee is expected to keep its benchmark lending rate unchanged on Wednesday. That would mark a sixth straight pause. In a bid to tame inflation, the central bank’s Federal Open Market Committee tightened monetary policy by 525 basis points from March 2022 through July 2023.
“Following the worse-than-hoped-for inflation numbers over the course of the first three months of this year, market participants who had earlier looked for as many as (five) to (seven) rate cuts this year from the Fed may now in our view be growing to accept that (Fed Chair Jerome Powell) is walking the talk when he says that the Fed will likely take ‘longer than expected’ to feel confident enough that its 2% inflation target is achievable before cutting rates,” Stoltzfus said.
Investors can expect policymakers to hold monetary policy steady “as long as inflation remains as sticky as it has been,” he added.