The second quarter earnings season for U.S. stocks is approaching, with corporate profits under the impact of tariffs becoming the focus of attention

According to the Zhitong Finance APP, as the second quarter earnings season for U.S. stocks is about to begin, investors are looking for signs of the impact of the trade war initiated by President Trump on companies. LSEG data shows that analysts predict that the S&P 500 index's earnings will grow by 5.8% year-on-year in the second quarter, a significant decline from 13.7% in the first quarter. Although earnings growth is expected to slow compared to the first quarter, the sharp depreciation of the dollar may help offset some of the impacts of tariffs.

Meanwhile, as the S&P 500 index has returned to historical highs, the market is once again questioning whether earnings growth is sufficient to support higher stock prices. According to LSEG data, the current forward price-to-earnings ratio of the index is about 22 times, higher than the 10-year average of 18 times.

This week, Trump further escalated the trade war he initiated. On Monday, he notified 14 countries, including Japan and South Korea, that they would face significantly increased tariffs starting August 1. On Tuesday, Trump announced plans to impose a 50% tariff on imported copper and stated that tariffs on the semiconductor and pharmaceutical industries are forthcoming.

Keith Lerner, Chief Market Strategist at Truist Advisory Services, stated, "During the first quarter earnings season, people were thinking, we really don't know what will happen. There were far fewer companies lowering their earnings guidance than expected, which indicates that businesses are still relatively resilient." "The question is whether they are truly resilient or just because we haven't really seen the impact yet."

Tariffs are expected to drive up prices and slow growth, while the uncertain policy outlook is also a drag factor for companies delaying decisions. Peter Tuz, President of Chase Investment Counsel, stated that although trade negotiations are ongoing, tariffs may still be a topic for many companies during earnings conference calls.

David Kostin, Chief U.S. Equity Strategist at Goldman Sachs, and his team stated that high tariffs have not yet put pressure on sales forecasts or corporate spending plans at the overall index level. However, they noted that if companies are forced to bear the tariff costs themselves, some corporate profit margins are at risk. The bank's economists expect that consumers will bear 70% of the direct tariff costs.

It is worth mentioning that after a significant downward revision in early April, the earnings growth forecast for the S&P 500 index in the second quarter has stabilized in recent weeks. Sean Simonds and other UBS equity strategists wrote in a report that the initial negative earnings revisions occurred after Trump announced reciprocal tariffs on what he called "Liberation Day" in early April, and expectations for industries affected by tariffs, such as automobiles, transportation, and durable consumer goods, remain well below April levels.

Tajinder Dhillon, Senior Research Analyst at LSEG's Data and Analytics Division, stated that in the past three months, the estimated earnings growth rate for the S&P 500 index in the second quarter has decreased by 4.4 percentage points, while the average decline over the past three years was 3.5 percentage points.

However, strategists pointed out that this is not necessarily a negative signal, as most companies in the S&P 500 index typically exceed analysts' earnings expectations, and lower expectations also mean it is easier to surpass them. Nicholas Colas, co-founder of DataTrek, stated, "Many S&P 500 constituent companies currently have low expectations, so they are likely to show earnings growth far exceeding expectations in the second quarter." "He added that the recent new high of the S&P 500 index 'shows that the market sees it this way.'

Nicholas Colas and other analysts believe that a weaker dollar could be beneficial for corporate earnings, as it makes U.S. goods cheaper overseas. Data shows that the dollar index, which measures the dollar's performance against a basket of currencies, fell by about 7% in the second quarter; it has dropped about 10% year-to-date, marking the largest decline in any first half since 1973.

Peter Tuz stated, 'Many Fortune 500 companies have half of their business overseas, so this could bring positive surprises for some companies, perhaps enough to offset their negative expectations regarding future tariff trends.'

Specifically by sector, according to LSEG data, the technology sector and the communication services sector are expected to achieve the highest year-on-year earnings growth in the second quarter, with technology sector earnings expected to grow by 17.7% year-on-year and communication services sector expected to grow by 31.8%.

Market optimism about artificial intelligence remains high. Nvidia (NVDA.US) saw its market value approach $4 trillion last week, at one point poised to become the highest-valued company in history. Dakota Wealth Senior Portfolio Manager Robert Pavlik stated, 'You need these big companies, these super giants, not to have seriously disappointing performances.'