Earnings Recession Deepens as Investors Brace for Second Quarter Reports

The second quarter earnings season is expected to bring a third consecutive decline in earnings for S&P 500 companies, with estimates projecting a 7% decrease in earnings per share compared to the same quarter last year. Consumer Discretionary and Communications Services are the only sectors expected to see earnings growth. Additionally, there is no year-over-year revenue growth expected for the first time in 10 quarters. The impact of AI on profits, the health of the consumer, and the state of the financial system will be key themes to watch. While there is a "low bar" for earnings, some tech stocks face high expectations following Nvidia's AI surge last quarter. However, there is optimism that this quarter might mark the bottom for year-over-year earnings comparisons.