Capital investors are preparing for a second consecutive decline in US quarterly profits driven by technology and material sectors, which could undermine record business on the stock market.
Companies across America are expected to show a 2.8% drop in earnings per share for April-June, after a decline of 0.3% in the first quarter, according to FactSet. If this happens, the two types of backlog quarters will be a "recession of income" – a phenomenon that has not been witnessed by share investors since mid-2016.
Contract corporate earnings would highlight concerns about US economic growth, which coincides with a trade dispute with China and recent disappointing production figures. The end of the ten-year US expansion could have prompted investors to reduce the risk by diverting funds into bonds to cope with the recession.
Despite the decline in profits in the first quarter, US stocks continued to grow. Last week, the US S & P 500 index hit 3,000 points after Federal Reserve President Jay Powell strengthened the market's position that the central bank will record interest rates later this month.
Technological stocks are particularly vulnerable to falling wages. Analysts estimate that net earnings per share in technology companies will shrink by an average of just over 7 percent over the second quarter of last year, with Credit Suisse estimating the worst sector in terms of revenue.
The technology sector, which after the redistribution of indexes no longer includes social media groups such as Facebook and the Google Alphabet parent company, is dominated by hardware companies, suffers from its tougher labor market. Sachs. Labor costs account for about 16 percent of IT companies' revenues, which is the second highest level in the industrial sector.
"Pressure pressure for big technology companies is what drives a decline in profits," said Patrick Palfrey, Senior Capital Strategist for Credit Suisse. "There is pressure on earnings, but it is not universal – it is felt by some companies, but they are very large."
Not all analysts are sure that the earnings will fall. American companies usually offer dire directions to encourage analysts to lower income forecasts – they create a low line that can be easily overcome when the results are officially published. This happened in the first quarter, when the forecasts for a 4.6% fall in revenues based on company guidelines fell over time by 0.3%.
The effect of redemption of shares will also mitigate the effect of lower profits on the basis of a share. Redemption of shares from the company's shares market shares the shares, so the profit is allocated to fewer shares. The buy-out of the first quarter of S & P 500 shares reached $ 205 billion, and if the rate continues in the second quarter, companies will go up to $ 806 billion last year's record high.
The worse profits of companies are bringing disappointment to economic data, which points to the cooling down of the US economy, said Palfrey of Credit Suisse. "We do not see a recession over the next few years, but we are careful," he said.