With first-quarter earnings season well underway, Scott Martin, United Advisors chief market strategist, said investors should exercise caution when looking for opportunities to get into the market.
“Pick your favorite tech company and they pretty much bombed,” he said. “Google, Microsoft … Facebook is next week, but that’s selling in sympathy. Even Starbucks, which is a great retailer, is hurting today.”
Of those companies that reported their quarterly figures after the closing bell on Thursday, Alphabet (NYSE:GOOGL) – Google’s parent company—and Microsoft (NASDAQ:MSFT) missed expectations on both the top and bottom lines. Shares of both companies extended their after-hours declines on Friday, falling more than 5.5% each during the trading day.
Starbucks, meanwhile, reported mixed earnings, but sales at stores open 12 months or longer came in below Wall Street forecasts. Shares of the coffee giant also traded lower by at least 5.6%.
“I think earnings numbers are showing a little bit of caution here. If you missed this rally off the bottom in February, I think you can wait to get back in at lower prices,” Martin advised.
To that point, data from S&P Global Market Intelligence show aggregate first-quarter earnings are expected to see a decline of 7.9% year-over-year, the third-consecutive quarterly decline. According to the historical data, such a steep drop hasn’t been recorded since the second quarter of 2009.
Revenue growth is also expected to see a downward shift for the fifth-quarter in a row, with analysts estimating growth of -1.1%.
The energy sector in particular is expected to take the biggest hit – an 110.4% plunge – as multi-year low oil prices provide a significant headwind for firms in the sector.
Still, the data also show the earnings beat rate in the first quarter so far is 75%, ahead of the historical average of 66%.