Analysts expect first-quarter earnings for S&P 500 companies to decline 0.1 percent from a year earlier, which would be the first quarterly profit decline for the group since 2016, according to IBES data from Refinitiv.
The latest forecast is down sharply from the start of the year, when analysts estimated growth of 5.3 percent for the quarter.
The earnings picture for this year was expected to be much weaker than that for 2018, when federal tax cuts fueled growth rates above 20 percent for S&P 500 companies for much of the year.
But estimates have fallen in recent months amid increased worries over lower global growth, particularly in China, and weaker outlooks from top technology names like Apple. Forecasts for energy companies have dropped as well, in a reflection of slumping oil prices.
The gloomy trend in earnings has raised worries about a U.S. profit recession, defined as two straight quarters of year-over-year earnings declines, even as stocks have rebounded sharply this year from a late 2018 selloff. The S&P 500 is up 8 percent so far this year.
Although expectations for 2019’s other three reporting periods have also dropped in recent months, they are still positive. Second-quarter S&P 500 earnings are expected to increase 3.6 percent from a year earlier, while profit growth for all of 2019 is estimated at 4.3 percent, based on Refinitiv data.
Yet negative estimates tend to hurt investor sentiment, even if the actual earnings numbers show profit growth, said Bucky Hellwig, senior vice president at BB&T Wealth Management in Birmingham, Alabama.
“If the discussion turns to earnings recession, that’s not going to help stock prices, whether it occurs or not,” he said.
The second quarter of 2016 was the last reporting period in what was a four-quarter profit recession for S&P 500 companies.
Technology and commodity-related sectors have suffered among the biggest drops in forecasts.
The S&P 500 technology companies, among the biggest contributors to profit growth in recent years, are expected to report a 6.1 percent decline in earnings from a year earlier.
“Companies are really managing expectations to the point where investors are planning for the worst...At some point we will have some catalyst that moves it up, but there’s been this rush to get out the bad news and revise downward,” said Kristina Hooper, chief global market strategist at Invesco in New York.