Standard & Poor's chief investment strategist Sam Stovall predicted Monday that second-quarter stock earnings reported in July will show a weak performance across all U.S. sectors.
In June, all 10 sectors in the S&P 1500 Composite Index declined in price from 2.6% for Utilities and 4.0% for Health Care, to more than 6.5% for Energy, Financials and Information Technology, Stovall noted in "Dismal Quarter on Deck," a U.S. sector comment written for S&P Equity Research.
Stovall (left) pointed to Capital IQ's report that analysts now see the S&P 500's Q2 results coming in 0.6% lower than they had expected a month ago. "What's more, seven of the 10 sectors in the 500 have seen decreases in Q2 expectations, ranging from 0.1% to 0.3% for six sectors (Consumer Discretionary, Consumer Staples, Info Technology, Materials, Telecom Services and Utilities) to as much as 3.9% for the Financials sector," he wrote.
"Even though the bar has been lowered for Q2 earnings results, thereby possibly triggering a short-term counter-trend rally, history suggests that further seasonal challenges lie ahead," Stovall said. "What's more, by our analysis, technical factors continue to point to a deepening pullback or correction, and fundamental forecasts may be starting to acknowledge these slowing conditions."
The S&P 500's performance in June represented one of only three months to post average declines since 1945, along with February and September, Stovall noted. The index swooned in June, declining 5.7% in price, accompanied by a similar 5.7% drop for the S&P SmallCap 600, as well as a 5.4% fall the S&P MidCap 400 Index.
