Earnings Season Draws Spotlight After Resilient Bank ResultsEarningsSeasonDrawsSpotlightAfterResilientBankResults

Some of the biggest banks on Wall Street reported upbeat first-quarter earnings, proving to be resilient in the face of broader turmoil in the sector. Can investors expect more earnings surprises to come? Recession fears, banking stress and uncertainty across financial markets have drawn attention to earnings season, as investors search for early warning signs that corporate America may be under pressure. Financial results from the first three months of the year will demonstrate if rising costs and softer demand are squeezing profit margins and sales—and if businesses are equipped to weather a slowdown in economic activity amid higher interest rates. Earnings per share for companies in the S&P 500 are forecast to fall 6.5% year over year, based on a combination of analyst estimates and actual results compiled by FactSet. If that projection holds true, it would mark the largest earnings decline since the height of pandemic shutdowns in the second quarter of 2020. Revenues are expected to grow 2%, which would represent the worst showing since the third quarter of 2020. However, analysts are looking for earnings to bounce back in the second half and finish the full year up 0.9% from 2022.

Next week, investors will get a glimpse at quarterly results from companies across the tech (Microsoft, Alphabet, Amazon and Meta), financial (Visa and Mastercard) and energy (ExxonMobil and Chevron) industries, among others.

The outcome of first-quarter earnings could dictate the direction of a range of assets in the short run. Looking further ahead, companies that can maintain and grow their dividends during challenging times can be a critical allocation for investors. Dividend-paying defensive stocks tend to be less volatile, less exposed to sell-offs, and more recession-resistant, according to a new analysis by Jennison Associates.