{"id":10948,"date":"2023-11-30T19:24:10","date_gmt":"2023-11-30T19:24:10","guid":{"rendered":"https:\/\/connectwithfund.com\/markets\/stocks-shrug-off-downturn-fears-as-number-of-companies-citing-recession-drops\/"},"modified":"2023-11-30T19:24:10","modified_gmt":"2023-11-30T19:24:10","slug":"stocks-shrug-off-downturn-fears-as-number-of-companies-citing-recession-drops","status":"publish","type":"post","link":"https:\/\/connectwithfund.com\/?p=10948","title":{"rendered":"Stocks shrug off downturn fears as number of companies citing \u2018recession\u2019 drops"},"content":{"rendered":"
\n

The number of companies mentioning recession on their quarterly earnings calls is falling, as stocks extend a big, three-week rally and investors weigh chances for a soft-landing for the U.S. economy.<\/p>\n

Eleven percent of companies in the S&P 500 index cited \u201crecession\u201d during their conference calls on earnings results for the third quarter, well below peaks last year and in 2020 that were each more than 40%, according to a DataTrek Research note emailed Monday, citing FactSet data.<\/p>\n

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<\/p>\n

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<\/p>\n<\/figure><\/div>\n

Still, company-management worries over an imminent economic downturn remain elevated when looking out over the past decade, said Nicholas Colas, co-founder of DataTrek, in the note. He said mentions of recession during third-quarter-earnings calls remained \u201cat the upper end of the 2013 \u2013 2019 band\u201d where 3% \u2013 11% of companies cited the word.<\/p>\n

\u201cStocks have shrugged off recession fears, but they remain elevated at many companies,\u201d said Colas. \u201cThis is a recipe for further cost cutting, and we expect unemployment to increase in coming months as a result.\u201d<\/p>\n

At the sector level, the financials and industrials sectors have the highest number of S&P 500 companies citing \u201crecession\u201d on third-quarter earnings calls, while real estate has the highest percentage of companies doing so, according to a note from John Butters, FactSet\u2019s senior earnings analyst, on Nov. 17.<\/p>\n

Meanwhile, the Conference Board\u2019s leading economic index has continued to flash recession signs even as the U.S. economy has kept growing amid a low unemployment rate. Investors have been keeping a close eye on inflation, which has eased this year after surging in 2022 to the highest level in decades, but remains above the Federal Reserve\u2019s 2% target.<\/p>\n

Soft-landing hopes<\/strong><\/h4>\n

The Fed has rapidly raised interest rates in an effort to tame inflation while at the same time trying to engineer a so-called soft landing for the U.S. economy. That is, the central bank has been aiming to avoid triggering a recession with its series of rate hikes begun in early 2022.\u00a0<\/p>\n

With inflation easing, the Fed has held its benchmark rate steady since it last lifted it to a 22-year high in July.<\/p>\n

\u201cThe problem: Inflation is falling because rapid rate rises to combat it have pushed U.S. growth trend below pre-Covid levels,\u201d BlackRock Investment Institute wrote in a market-commentary note Monday. \u201cWe think more of the same is needed to keep inflation down as price pressures resume amid slowing labor force growth and geopolitical shocks.\u201d<\/p>\n

According to BlackRock, \u201cmarkets appear to miss this bigger picture, and we see more volatility ahead as they swing between hopes for a \u2018soft landing\u2019 and fears about higher rates and recession.\u201d<\/p>\n

More than half of S&P 500 companies \u201cstill see inflation pressures in their cost structures and are calling this to the attention of Wall Street analysts and investors,\u201d said DataTrek\u2019s Colas, pointing to data from FactSet on mentions of \u201cinflation\u201d during their earnings calls for the third quarter.<\/p>\n

While the percentage of S&P 500 companies citing \u201cinflation\u201d fell to 55%, from a 2022 peak of 83%, that is \u201cstill well above prepandemic era readings\u201d in the range of 18% to 32%, Colas said of their earnings calls.<\/p>\n

\u201cCorporate America\u2019s ongoing unease about important macroeconomic trends\u201d based on mentions of \u201crecession\u201d and \u201cinflation\u201d on earnings calls isn\u2019t \u201cnecessarily bad\u201d for stocks, according to the DataTrek note.<\/p>\n

\u201cManagements know the name of the game next year will be margin management, not mindlessly maximizing revenues,\u201d Colas wrote. \u201cAs long as the U.S. economy continues to grow into next year, this should allow companies to meet or beat Wall Street analysts\u2019 earnings estimates over the next 2 quarters.\u201d<\/p>\n

U.S. stocks were rising on Monday afternoon, with the Dow Jones Industrial Average
\n DJIA
\n up 0.5% while the S&P 500
\n SPX
\n gained 0.7% and the Nasdaq Composite
\n COMP
\n climbed 1%, according to FactSet data, at last check.\u00a0<\/p>\n

The S&P 500 was on track to extend its big winning streak, after jumping 9.6% over the past three weeks in its largest three-week percentage gain since June 2020, according to Dow Jones Market Data. The index has risen more than 18% so far this year, based on Monday afternoon trading.<\/p>\n

Read:<\/strong> Stock market surges toward 2023 high. Will holiday shoppers put it over the top?<\/p>\n<\/p><\/div>\n<\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

The number of companies mentioning recession on their quarterly earnings calls is falling, as stocks extend a big, three-week rally and investors weigh chances for a soft-landing for the U.S. economy. Eleven percent of companies in the S&P 500 index cited \u201crecession\u201d during their conference calls on earnings results for the third quarter, well below peaks last year and in 2020 that were each more than 40%, according to a DataTrek Research note emailed Monday, citing FactSet data. Still, company-management worries over an imminent economic downturn remain elevated when looking out over the past decade, said Nicholas Colas, co-founder of<\/p>\n","protected":false},"author":1,"featured_media":10949,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[39],"tags":[],"class_list":["post-10948","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-markets"],"yoast_head":"\nStocks shrug off downturn fears as number of companies citing \u2018recession\u2019 drops | ConnectWithFund<\/title>\n<meta name=\"description\" content=\"The number of companies mentioning recession on their quarterly earnings calls is falling, as stocks extend a big, three-week rally and investors weigh\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" 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