US Stocks: Preview of Q1-March Earnings Reports

■ In addition to AI-related factors, the impact of private lending and rising oil prices on corporate performance should also be considered.  

■ Valuation premiums have been largely digested, and short-term performance may be under pressure, but the upward expectation remains commensurate with profit growth. 
 
Starting with the release of earnings reports by major financial institutions on the 13th, the earnings reports of major US companies for the first quarter of January to March will be released in full. The third week (13th-17th) will see various financial institutions, as well as the leading Dutch semiconductor equipment manufacturer and the leading Taiwanese wafer foundry, release their earnings; the fourth week (20th-25th) will focus on technology, semiconductors, electric vehicles, and large investment companies; the fifth week (27th-May 1st) will see the leading companies in the technology, semiconductor, smartphone, e-commerce, and logistics sectors take the stage. Of the seven technology companies known as the "Big Seven" of US stocks, six will complete their earnings reports in April, marking a peak period. Retail and semiconductor leaders will then follow suit until the last semiconductor giant releases its earnings on May 20th. The US stock market is expected to continue to fluctuate around these earnings reports. The market generally believes that demand for AI-related chips remains strong, but concerns about the profitability of over-investment and the deterioration of corporate finances have not dissipated. Meanwhile, credit risk in the private lending sector and the continued pressure on profit margins from high oil prices also warrant attention. In addition to quarterly results, it is crucial to observe management's guidance on the future operating environment. 

 
According to statistics from financial data company LSEG I/B/E/S as of March 2nd, the year-on-year growth rate of earnings per share (EPS) for S&P 500 companies in the first quarter is expected to be 14.4%, roughly the same as at the beginning of the year. However, there is significant industry divergence: earnings expectations for the information technology (IT) and energy sectors continue to be revised upwards, while cyclical sectors such as consumer discretionary and industrials, as well as consumer staples, have been revised downwards, reflecting the impact of tensions in the Middle East. In terms of industry contribution, the IT sector has the most significant impact on overall earnings growth, while the combined contribution of the other 10 sectors is relatively limited. Therefore, in addition to focusing on the sustainability of earnings growth in the IT sector, whether AI technology can further improve the profit margins of other industries is also a key point of observation. 

 
The forward 12-month price-to-earnings ratio (PER) is 19.4, a significant drop from the peak in October last year; the IT sector's PER is 20.9, also a substantial decrease from its previous high, reaching its lowest level since early 2023. This indicates that market expectations for AI-related profit expansion have been revised, and overall valuation pressure has largely dissipated. Given the continued uncertainty in the Middle East, the stock market may experience short-term volatility and limited upside. However, in the medium term, with continued corporate profit expansion, the stock market is expected to maintain an upward trend commensurate with earnings growth, with the year-end target for the S&P 500 remaining unchanged at 7200 points.