First quarter earnings results of big U.S. companies have largely been above average Wall Street expectations.
While it is still early in the earnings reporting period, the better-than-expected results reported by some large companies have improved overall sentiments about the country's eventual economic recovery.
Analysts said earnings had largely rebounded when compared with last year's record lows because of the pandemic. However, most companies have held off giving out guidance for their expected performance for the rest of the year given the uncertainties revolving around the extended pandemic and other factors.
According to Refinitiv, 110 of the S&P 500 companies have already released their first quarter earnings results. Around 85.5% of the results have beaten average analysts' estimates for earnings per share for the quarter.
Refinitiv said if the trend continues throughout the first quarter reporting season, it could beat the record earnings growth set in 1994. It could also become the highest quarterly profit growth on record since 2010 following the global financial crisis.
Refinitiv data showed that performances by major banks over the past quarters had driven up the forecast for the current quarter. Average analysts' expectations had risen to 33.3% for the first quarter year-on-year and 24.2% when compared to the previous quarter.
"The momentum for corporate earnings looks positive. Overall, the U.S. earnings season has got off to a strong start," chief investment officer global wealth management at UBS AG, Mark Haefele, said in a note to investors.
While companies in the S&P 500 have mostly rebounded, the index has remained largely steady. Since mid-April, the index has only increased by less than 1% when the reporting season kicked off.
U.S. stocks dipped Thursday following reports that President Joe Biden was preparing to submit a proposal to raise taxes on the wealthy next week to fund new investments.
Analysts said that reports of a resurgence of the coronavirus in other parts of the world also added to investor worries. One of the more notable high-profile disappointments this week was a sharp drop in Netflix's stock after it announced a decline in its subscriber growth for the first quarter.
