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Looking Ahead to the Q1 Earnings Season

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The Q1 reporting cycle will really get going when the big banks come out with their March-quarter results on April 11th, but the Q1 earnings season has actually gotten underway already, with four S&P 500 members having come out with results for their fiscal quarters ending in February.

We have another 10 such index members on deck to report their respective February-quarter results this week, including bellwether operators like Nike NKE, FedEx FDX, Accenture ACN and others. We and other research organizations count these February-quarter results as part of our March-quarter tally.

By the time the big banks come out with their quarterly results about a month from now, we will have such Q1 results from almost two dozen S&P 500 members.

The market has been unimpressed with the results we have seen in recent days, with three of the four stocks losing ground following the respective quarterly releases. We should note that these results from Costco COST, Oracle ORCL, and Adobe ADBE coincided with a broad market sell-off, so one could attribute the post-release weakness in each of these stocks to broad market forces.

That said, we do know that while Costco, Oracle and Adobe came out with strong and better-than-expected results for their respective February quarters, their guidance for the current period was tentative and underwhelming. The weak guidance from these companies follows similarly soft outlooks from the likes of Walmart, Target, Delta Air Lines, and others.

These weak guidance releases are coming at a time of growing anxiety about the macroeconomic backdrop, with many in the market starting to worry about the U.S. economy’s near-term growth momentum. Uncertainty about the Trump administration’s tariff policies is starting to show up in business and consumer confidence measures, and some have begun to worry if the ongoing public sector job cuts will eventually seep into the private sector as well.

We discuss the earnings impact of the tariff question here >>>The Earnings Impact of the New Tariff Regime

While we acknowledge that near-term risks have increased for the economy, we remain sanguine in our outlook and see the ongoing market weakness as a buying opportunity. The U.S. economy defied skeptics during and after the extraordinary Fed tightening cycle and remains resilient enough to withstand the current bout of tariffs-centric uncertainty.

Importantly, for the first time in a long time, the U.S. economy enjoys the backstop of the Fed with more than enough ‘dry powder’ to jumpstart growth should investors’ worst fears come to fruition.