Wall Street outlook under scrutiny
Analysts warned that Wall Street’s current earnings outlook may be overly optimistic given commodity-driven price pressures and elevated inflation. (reuters.com). Reuters notes U.S. oil prices have risen more than 70% over the past year and inflation remains above 3%, factors the market may be underestimating. (reuters.com)
Wall Street is heading into earnings season with profit forecasts that still look strong even as oil and inflation push costs higher. (factset.com) (bls.gov) FactSet said on April 10 that analysts still expect first-quarter earnings for the Standard and Poor’s 500 to grow 12.6% from a year earlier, which would be the sixth straight quarter of double-digit growth. The same report said the index trades at 20.4 times forward earnings, above its five-year average of 19.9 and 10-year average of 18.9. (factset.com) Those estimates have not fallen much since the year began. FactSet said the first-quarter growth forecast was 12.8% on December 31, while a March 26 Reuters report said LSEG data showed a roughly 14% growth expectation even after the Standard and Poor’s 500 had dropped nearly 4% since the war began at the end of February. (factset.com) (usnews.com) Inflation moved the other way. The Bureau of Labor Statistics said on April 10 that the Consumer Price Index rose 0.9% in March and 3.3% over 12 months, after a 2.4% annual reading in February. (bls.gov) Energy drove much of that jump. The Bureau of Labor Statistics said the energy index rose 10.9% in March, gasoline jumped 21.2% in the month, and energy prices were up 12.5% from a year earlier. (bls.gov) Oil has been the pressure point behind those numbers. Reuters reported on March 26 that United States oil prices were around $91 a barrel and up more than 30% since the war began, while the Energy Information Administration said on April 7 that higher crude prices were pushing gasoline toward nearly $4.30 a gallon in April. (usnews.com) (eia.gov) The basic risk is simple: when fuel, freight and raw materials cost more, companies either absorb the hit in profit margins or try to pass it on to customers. Reuters cited JPMorgan as saying each sustained 10% increase in oil prices could shave 15 to 20 basis points from economic growth, and oil near $110 for the rest of 2026 could cut consensus earnings-per-share estimates by 2% to 5%. (usnews.com) Not everyone expects an immediate break in profits. Reuters said portfolio manager Krishna Chintalapalli of Parnassus Investments argued United States companies have become more resilient to geopolitical shocks, while RBC Capital Markets strategist Lori Calvasina said the bigger earnings risk may sit in the second half of 2026 rather than the first. (usnews.com) That leaves the next few weeks as a test of whether corporate guidance catches up with the new cost picture. FactSet said 51 Standard and Poor’s 500 companies had issued negative first-quarter earnings-per-share guidance and 58 had issued positive guidance as of April 10, a split that still points to more confidence than alarm. (factset.com)
