Corporate Earnings, Forecasts Reflect Dampened Global Economic Outlook

Economic Outlook

Corporate forecasts are struggling to remain strong amid a string of negative economic and financial news, reports in Reuters said Wednesday (Jan. 23).

Shares for Facebook, Apple, Amazon, Netflix and Google — collectively known as the FAANG momentum stocks — all dropped Wednesday, while Johnson & Johnson, Stanley Black & Decker, IBM and other conglomerates similarly saw stock market declines.

A combination of missed earnings forecasts and muted outlooks among corporate giants led to a 1.22 percent drop of the Dow Jones Industrial Average, while the S&P 500 was down 1.42 percent and the Nasdaq Composite dropped 1.91 percent — representing their largest single-day percentage drops since Jan. 3, reports said.

Reuters identified a range of factors attributing to degraded corporate forecasts, including Financial Times reports that the White House has nixed previous plans to hold trade talks with China.

Amid concerns over ongoing trade disputes and separate analysis predicting a slowdown of the global economy, the International Monetary Fund earlier this week cut back its forecasts for global economic growth this year, reports said, while China also recently confirmed that it is facing its slowest economic growth rate in nearly three decades.

“There seems to be a plethora of negative news regarding the global economy and China and the corporate profits that were reported today couldn’t offset that,” said Horizon Investment Services chief executive officer Chuck Carlson in an interview with Reuters. “A lot of companies are coming out with earnings this week, so it’s going to be a battle between earnings and the perception of what’s going on [in] China and the global market.”

The ongoing U.S. government shutdown as well as recent National Association of Realtors data showing a drop in sales of homes in the U.S. last month add more fuel to the pessimism, reports said.

Last week the Organization for Economic Cooperation and Development released a report also highlighting a weakening global economy, while separate analysis has also found growing pessimism among U.S. corporates and small businesses.