Analysts Snap Longest Run of US Earnings Upgrades in Five Years

(Bloomberg) -- Equity analysts have turned net negative on the outlook for US corporate earnings for the first time in months, reflecting concerns about the effect on profits of inflation and higher interest rates.

More analysts have cut rather than raised their earnings estimates for the first time in 23 weeks, ending what had been the longest run of upgrades since September 2021, according to a Citigroup Inc. index.

"The main drivers of the weakness come from consumers, both staples and discretionaries, materials and financials," said Stephan Kemper, chief investment officer at BNP Paribas Wealth Management Germany. "I think those revisions can be directly linked to a combination of higher living costs and rising energy prices."

While Wall Street analysts are broadly confident of a bumper year of earnings for America Inc., some have raised concerns about the outlook for the equity market in the near term.

Morgan Stanley strategist Michael Wilson warned earlier this week that the S&P 500 Index is at risk of dropping as much as 7% should stock valuations extend a recent decline and if further increases in energy prices prompt tighter monetary policy.

Inflation around the world will be faster than forecast in 2027, necessitating tighter monetary policy, the OECD said in a report on Wednesday. The Federal Reserve hiked US interest rates earlier this month for the first time in three years in response to price pressures.