From Reuters, May 6:
- Q1 earnings for S&P 500 on track to rise 28.2%, strongest since Q4 2021
- Estimates for rest of 2026 also climbing
- AI boost, corporate resiliency seen as key for US businesses
NEW YORK, May 6 (Reuters) - A humming U.S. corporate profit engine is at the heart of the U.S. stock market's rally to record highs - an encouraging sign for investors as long as the fuel driving profits keeps flowing.
More than two-thirds through the first-quarter reporting season, S&P 500 companies are on track for their highest quarterly earnings growth in more than four years. Future projections are also growing rosier: Analysts' estimates for future 12-month U.S. earnings have risen by over 10% since the start of the year, according to LSEG Datastream.
As some of the worst-case economic fears tied to the war in Iran have receded, investors said Wall Street has been able to focus on the earnings strength, helped by massive investments in artificial intelligence technology and a generally solid economic backdrop."Because things have not gotten worse and the ceasefire has been in place for some time now, it's been earnings that have driven the move higher," said Chris Fasciano, chief market strategist at Commonwealth Financial Network.The benchmark S&P 500 is up 6% for the year, building on three straight years of solid double-digit percentage gains. The index has surged more than 14% since March 30, following a swoon sparked by the start of the U.S.-Israeli war with Iran.
STRONGEST QUARTER IN 20 YEARS?Investors had expected generally solid results when the reporting season kicked off last month, but they have far surpassed expectations. S&P 500 earnings are expected to have jumped 28.2% in the first quarter from a year earlier, including results from 350 index companies that have reported and analysts' estimates for those yet to report, according to data as of Tuesday from Tajinder Dhillon, head of earnings and equity research at LSEG Data & Analytics.That increase would be the highest since the fourth quarter of 2021, when businesses were recovering from pandemic lockdowns."Excluding special factors like favorable base effects and corporate tax cuts, earnings growth is arguably the strongest in two decades," Binky Chadha, chief U.S. equity strategist at Deutsche Bank, said in a note....
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