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Stocks enter the heart of Q1 earnings season this week, looking to build on what has been a surprisingly good quarter so far.
According to FactSet, roughly 36% of S&P 500 companies have reported first-quarter earnings already, with 73% of them exceeding analysts’ estimates. While that is below the 5-year average of 77% and the 10-year average of 75%, it is better than what many investors feared, given the first quarter volatility and sweeping federal changes.
Also, on a positive note, companies that have beaten earnings estimates by 10%, on average, which is higher than the 5-year average of 8.8% and the 10-year average of 6.9%.
Stocks rebounded nicely last week, as the Nasdaq rose 6.7%, S&P 500 jumped 4.6%, and the Dow Jones climbed 2.5%. But markets opened mixed this week in what appears to be a pivotal week, filled with key economic news and Magnificent Seven earnings.
Q1 GDP Released on Wednesday
Investors and economists have expressed deep concerns about a recession, as economic growth, according to many estimates, is expected to slow, mainly due to the shock of tariffs.
The Atlanta Federal Reserve Bank estimated the Q1 real GDP to be -2.5%, which would be down sharply from 2.4% growth in Q4. The adjusted alternative model forecast calls for GDP of -0.4%.
These numbers are worse than the consensus estimates among economists. The median estimate for GDP comes in around 0.4% growth for the quarter – essentially flat.
A GDP that surprises one way or the other could have a significant impact on stocks. Results will be released on Wednesday at 8:30 a.m. ET.
While GDP is the headliner, there are two other key economic releases coming out this week. On Tuesday, the April Consumer Confidence report comes out, and economists expect it to be lower than it was in March. The index has dropped for four straight months. In April, economists are targeting a score of 87.7, down from 92.9, with the baseline being 100.
Just last week, the University of Michigan’s influential Survey of Consumers showed an 8% decline in April, the fourth month in a row that consumer sentiment has dropped.
Also, the Personal Consumption Expenditures (PCE) report for March will be released on Wednesday morning. The Federal Reserve’s preferred inflation gauge held steady at 2.5% in February, the same as January. Economists expect it to fall to 2.2% in March, which would bring it closer to the Fed’s goal of 2% annual inflation.
However, the inflation rates or the GDP do not include the impact of tariffs, which kicked in in April.
Meta, Amazon and Apple Report Earnings
The other major storyline this week is the performance of Magnificent Seven stocks, as nearly half of them release Q1 earnings this week. Meta (NASDAQ:META) releases earnings Wednesday after the market closes, followed by Amazon (NASDAQ:AMZN) and Apple (NASDAQ:AAPL) on Thursday after the closing bell.
All three stocks have underperformed this year, with Apple down 16%, Amazon down 14%, and Meta off 6% year-to-date (YTD).
Analysts expect Meta to report earnings of $5.20 per share, up 10.4% year over year, on revenue of $41.4 billion, up 13.4%.
For Apple, analysts target earnings of $1.61 per share, a 5.2% year-over-year jump, on revenue of $94.1 billion – up 3.6%.
Further, Amazon earnings are expected to be $1.36 per share, a 39% increase. Revenue is anticipated to climb 8.2% to $155.1 billion.
