Dow Jones Industrial Average (DJIA) futures traded flat in early trading Tuesday, pointing to a nervous open on Wall Street. It comes asanalysts at Bank of America, Morgan Stanley, and UBS all slashed profit expectations across the stock marketgoing into 2020.
“Totally absurd! Analysts are taking a knife to their 2020 profit estimates just when the S&P 500 is about to set a new record! Analysts just cut S&P 500 estimates by the most since January ”-Holger Zschaepitz, Welt.
It’s an eerier parallel to October 2018 when a raft of analyst downgrades triggered a 16% slide in the Dow Jones. Conditions are similar to last year with the US stock market hovering just shy of record highs. As Zschaepitz explained:
“Last year 2019 earnings estimates started rolling right before the market sell-off. ”
Dow futures flat on Tuesday
Dow Jones Industrial Average (DJIA) futureswere flat at 6 am ET as traders await earnings reports from McDonald’s and Procter & Gamble.
S&P 500 futuresandNasdaq Composite futureswere also traded flat.
Wall Street nervous about (stock market earnings)
Earnings seasonthus far has surprised to the upside with 81% of companies beating (admittedly damp) expectations. But Wall Street remain cautious about growth going into 2020. Analysts revised total S&P 500 profit expectations down 0.5% for 2020, the biggest shift in nine months.
DataTrek Research is among the most glum, predicting almost zero growth in the next twelve months. Co-founder Nick Colas cites high wages and slow sales growth for the miserable outlook. Even as Q3 earnings beat expectations, analysts continue to revise this quarter’s estimates down.
“Analysts are cutting Q3 earnings expectations even as companies report above consensus results. At the start of Oct the consensus had a 4.1% earnings drop for S&P 500 earnings. That fell to 4.6% the next week & is now worse at -4.7% even with a solid week of ‘beats’. ”DataTrek Research.
But isn’t the Dow near all-time highs ?
The negative sentiment seems at odds with the Dow and S&P 500 ‘s lofty heights. As CCN reported, thestock market is within inches of all-time highsand expected to climb higher. How did this dichotomy emerge?
“Once the market gets past the initial relief [of Fed injections] it will have to contend with the deteriorating fundamentals.”
Earnings reports from Harley Davidson, McDonald’s, Hasbro, Procter & Gamble, and SNAP later today should give us another insight into the market’s fundamental health.
This article was edited bySamburaj Das
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