March 27 Dow closes lower but still posts its best week since 1938

Business has essentially ground to a halt this month due to the coronavirus pandemic. Few expect Corporate America to resume to anything remotely resembling normal any time soon.

With that in mind, analysts have dramatically slashed their forecasts for second quarter earnings. They were already predicting a drop for earnings in the first quarter.

According to data from FactSet, Wall Street now expects profits for companies in the S&P 500 to fall 10% from the second quarter a year ago — i.e. April through June. That would be the first double-digit drop in earnings since a nearly 16% plunge in year-over-year profits during the third quarter of 2009 — just as the US was bottoming out during the Great Recession.

Plunging oil prices and a sharp pullback in retail spending are the biggest culprits behind the slump in earnings. FactSet said that the energy and consumer discretionary sectors had, by far, the biggest cuts to profit forecasts.

Analysts are also predicting a decrease — albeit by just 1.1% — for the third quarter before a rebound of 4.5% in the last quarter of 2020. Profits are now likely to fall 1.2% for all of 2020 — the first annual drop since 2015. That pales in comparison to 2008’s staggering earnings decline of 25.4%. 

And if this is any comfort, Wall Street thinks there will be a sharp rebound next year, with analysts forecasting an increase of 14% or more in corporate profits for both next year’s first quarter and the rest of 2021.

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