Tariff clouds loom over the U.S. stock earnings season, with performance guidance showing the most pessimistic signals since the financial crisis
American companies' pessimistic comments on the economic situation during earnings conference calls have reached a new low since the financial crisis, with the S&P 500 index down nearly 15% from its February peak. Analysis shows that the business community's expectations for the future have generally been downgraded, especially in the automotive manufacturing and transportation sectors. Due to the uncertainty of Trump's trade policies, companies like Delta Air Lines and Kimberly-Clark have withdrawn or lowered their financial guidance. In contrast, consumer staples producers are relatively more optimistic
According to the Zhitong Finance APP, Bank of America’s analysis of the first batch of conference calls shows that the ratio of positive to negative comments on macroeconomic conditions this quarter is far below the average level and is expected to hit the lowest ratio since 2009. Earnings season is usually a boon for U.S. stocks, but as investors prepare for the consequences of Trump’s attempts to rewrite global trade rules, the S&P 500 index has fallen nearly 15% from its historical high in February. This is especially true for companies more closely tied to profits and the unpredictable economy, such as automakers and the transportation industry.
Some executives are struggling to assess the impact of the rapidly changing policies from the White House on their businesses. This has further pressured the U.S. stock market, which has recently faced the possibility of slipping back into a bear market due to increased risks of recession and inflation rising from Trump’s taxation.
Senior market strategist Jim Paulsen stated, “Almost all CEOs are lowering their expectations. The warnings from the business community have escalated.”
For example, ASML (ASML.US) warned that the company does not know how to quantify the impact of tariff announcements that could disrupt the semiconductor industry. Due to global trade uncertainties, Delta Air Lines (DAL.US) withdrew its full-year financial guidance, while Kimberly-Clark (KMB.US) lowered its full-year profit expectations, citing uncertainty about the impact of the trade war on its costs.
Data shows that so far this quarter, 27% of S&P 500 constituent companies have lowered their expectations for 2025, while only 9% have raised their expectations. According to data compiled by Citigroup, automakers have the most pessimistic outlook, having lowered their earnings expectations for the next 12 months by an average of about 9% in April. On the other hand, companies producing necessities such as food and consumer goods tend to perform better during economic downturns and are among the most optimistic, with their expectations raised by more than 1%.
Citigroup's trading strategy team stated that companies lowering their performance expectations are being punished, while those exceeding expectations receive limited rewards. According to the bank's data, companies that lowered their expectations averaged a 4.8% drop the next day, while those maintaining or raising their expectations averaged a 1% increase.
Bank of America predicts that as companies avoid providing guidance, a "potential information vacuum" will emerge, similar to what occurred during the pandemic. State Street macro multi-asset strategist Cayla Seder stated, “Given all the uncertainties, providing guidance will be challenging for companies. This means for investors that until tariff negotiations become more clearly defined, there will continue to be two-way risks, and volatility may persist.”