Prospect of U.S. profit drop rises for investors

Investors are growing more fearful that U.S. companies` profits could shrink this year following Apple`s warning of soft demand in China, coupled with mounting evidence of a drag from tariffs, a global slowdown and fading tailwinds from tax cuts.

Profit-growth estimates for 2019 had already been eroding for months before widely held Apple Inc https://tmsnrt.rs/2H11rNA)

Adding to U.S. companies` potential woes, a strengthening dollar could become an even bigger negative for many U.S. multinationals this year, strategists said.

The dollar index , which tracks the greenback against six major currencies, rose 1 percent during the fourth quarter and was up 4.4 percent year-over-year by the end of the quarter.

"People are just starting to talk about (dollar strength)," Fiduciary Trust`s Olsen said. Weaker oil prices will drag as well, he said, in a reversal of what occurred in 2018.

Top strategists at some big banks had been getting more pessimistic on earnings heading into the new year. Morgan Stanley in its outlook late last year said there was more than a 50 percent chance of a "modest earnings recession" in 2019.

Goldman Sachs strategists nodded to the weakening trend in a recent note: "We expect a sharp slowdown in profit growth in all regions this year, particularly in the U.S., coupled with significant downgrades to consensus expectations."

(This article has not been edited by Zeebiz editorial team and is auto-generated from an agency feed.)