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 A slew of big banks, including JPMorgan Chase & Co and Bank of
America Corp, is due to report first-quarter earnings next week,
providing an expected bright spot in an otherwise gloomy quarter.
Profits of companies on the S&P 500 are projected to have declined
by 2.9 percent in the first three months from a year ago, according
to Thomson Reuters data.
Investors will also be watching other firms, such as Netflix Inc,
General Electric Co and Schlumberger NV, to see if corporate America
more broadly outperforms the negative forecasts analysts have set
for it.
"The market will take a break from Fed watching and actually focus
on fundamentals," said Nicholas Colas, chief market strategist at
the ConvergEx Group in New York.
"It's going to drive a lot of feelings of general investor
confidence or concern about the back half of the year," he said.
Energy companies will likely be hit by a dramatic drop in oil prices
since last June. As well, a strong U.S. dollar is expected to eat
into the earnings of companies with international exposure as they
convert their profits back into dollars.
BOON FOR BANKS
Big banks start reporting their quarterly earnings on Tuesday,
starting with JPMorgan Chase & Co and Wells Fargo & Co.
Mortgage lending is expected to prop up U.S. bank earnings for the
first quarter, as lower mortgage rates have spurred applications to
refinance home loans.
Financials have the rosiest outlook among sectors, with analysts
projecting first-quarter 2015 earnings to have surged 10.8 percent
from a year ago, according to Thomson Reuters data.
In energy, the worst-performing sector, companies may see
first-quarter earnings plummet 64.3 percent from the same quarter a
year ago, according to analyst estimates.
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With a mixed bag of recent economic data, many market participants
are taking a neutral stance going into earnings season, said King
Lip, chief investment officer at Baker Avenue Asset Management in
San Francisco.
"They're not negative, and they're not particularly bullish," Lip
said. "They're positioning more neutrally due to the fact that some
of the economic data we've had pretty recently has been flattish."
Data released Thursday showed the number of Americans filing new
claims for jobless benefits rose less than expected for the week
ended April 4, in a positive sign for the labor market after a
slowdown in job growth in March.
Despite the mixed macroeconomic reports, there are reasons why
stocks should rise during earnings season, said Bruce Zaro, chief
technical strategist at Bolton Global Asset Management in Boston.
The S&P 500 rose to a high of 2,119.59 on Feb. 25, on the back of
strong fourth-quarter earnings, but then gave up 3.8 percent,
falling to 2,039.69 on March 11. Then, after rising to another high
of 2,114.86 on March 23, the benchmark index fell again, by 3.3
percent, to 2,045.50 on March 26.
After those significant drops in March, "I would expect individual
stocks to make new highs and I think the odds are very good that
indexes will reach new highs as well," Zaro said.
(Editing by Linda Stern and Bernadette Baum)
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