Equity analysts turn net negative on US corporate earnings outlook for first time in 23 weeks

Wall Street’s earnings optimism just hit a speed bump. For the first time in 23 weeks, downgrades of US corporate earnings estimates outnumbered upgrades, according to a Citigroup index tracking analyst sentiment. The shift ended what had been the longest unbroken streak of net positive earnings revisions since September 2021. What broke the streak The Federal Reserve raised interest rates earlier in September, its first hike in three years. The OECD has also flagged that global inflation in 2027 will likely exceed prior forecasts, suggesting central banks may need to lean even harder on the brake pedal. The weakness in earnings estimates is not evenly distributed. Consumer staples, consumer discretionary, materials, and financials are the sectors drawing the most concern. When the cost of living rises, households pull back on spending, and companies selling everyday goods or discretionary items feel it first. Financials face their own version of the squeeze, caught between higher funding costs and the risk that borrowers start struggling. Morgan Stanley raises the alarm Morgan Stanley strategist Michael Wilson warned that the S&P 500 could fall as much as 7% if valuations cont...