Wall Street Banks Divided on Corporate America's 2024 Earnings Outlook

Wall Street banks are divided on 2024 earnings outlook, with tech giants' results crucial to market direction amid high inflation and rates. Investors closely watching for signs of economic strength.

Nasiru Eneji Abdulrasheed
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Wall Street Banks Divided on Corporate America's 2024 Earnings Outlook

Wall Street Banks Divided on Corporate America's 2024 Earnings Outlook

As the first-quarter earnings season kicks into high gear, Wall Street banks are split on their forecasts for Corporate America's profits in 2024. With more than 30% of S&P 500 companies set to release quarterly updates this week, including tech giants like Tesla, Alphabet, Meta Platforms, and Microsoft, investors are closely watching for signs of the market's direction.

Morgan Stanley's Michael Wilson has expressed "cautious optimism" about the earnings outlook, expecting profit growth to improve in 2024-2025 as the economy strengthens. However, JPMorgan's Mislav Matejka argues that high inflation, a stronger dollar, and geopolitical tensions are obscuring the outlook. "Investors are expecting S&P 500 earnings per share to accelerate by almost 20% by the fourth quarter, which is too steep a hurdle," Matejka said.

The focus is shifting towards earnings rather than rates to drive further gains in the stock market. A record 63% of investors surveyed are optimistic about the S&P 500's rebound, driven by strong earnings from Big Tech companies. However, Matejka cautions that the market is still showing some complacency, with nearly half of investors viewing 10-year Treasury yields above 5% as a major risk to US stocks.

Why this matters: The divergent views among Wall Street banks highlight the uncertainty surrounding the corporate earnings outlook for 2024. The performance of major tech companies and the broader market's ability to meet high expectations will be crucial in determining the direction of the stock market and the overall health of the US economy.

Despite the mixed forecasts, some analysts believe the broader market may see a trough in earnings declines, even as the "Magnificent Seven" companies, which drove much of the S&P 500's gains last year, face slowing earnings growth. The Federal Reserve's stance on keeping interest rates high to combat inflation is putting pressure on companies to deliver stronger profits and revenue. As investors navigate this complex environment, the upcoming earnings reports will be closely watched for signs of the market's trajectory in the months ahead.

Key Takeaways

  • Wall Street banks split on 2024 corporate earnings outlook
  • Tech giants like Tesla, Alphabet, Meta, Microsoft to report earnings
  • Morgan Stanley optimistic, JPMorgan cautious on earnings growth
  • Investors expect 20% S&P 500 earnings growth, seen as too steep
  • Earnings, not rates, to drive stock market gains; 10-year yields above 5% a risk