'The consumer space will be tough going into this quarter,' said Stephanie Niven.
US stocks reeling from the impact of high bond yields are facing a new threat from an expected slew of profit warnings, triggered by fading US consumer spending trends.
Companies across the US, from used-car dealers to retailers, are already starting to see slowing demand. And strategists like Morgan Stanley’s Michael Wilson are warning about consumer stocks, which have outperformed the broader market so far in 2023, as shoppers are expected to wind down spending. US discretionary stocks have fallen for a third straight week.
On top of the risk from elevated borrowing costs and a weaker consumer, earnings expectations for S&P 500 companies over the next 12 months are near record highs. About 60% of participants see the upcoming results pushing the S&P 500 lower. Nearly 37% expect the gauge to end the year 5% to 10% lower from current levels, and 8% see it sliding even more.
“The earnings cycle appears to be passing a near-term trough, a lagged response to last year’s inflation peak, though a growth catalyst remains elusive and the late summer surge in oil prices threatens to upend the recovery path,” strategists Gina Martin Adams and Michael Casper wrote in a note.
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