Now, some analysts believe earnings may not actually drop at all in the first quarter, a welcome change of doomsday scenarios once were worrying. The S & P 500 has not fallen year on year in any quarter since mid-2016.
At the beginning of the first quarter of this year, Wall Street analysts forecast a 2.5% drop in earnings per share, according to Credit Suisse. As of Friday morning, this assessment has risen to positive territory.
According to Credit Suisse estimates, analysts estimate S & P 500's earnings will rise by 2.5% to 3% by the end of the year.
It's not crazy. We're entering the earnings season: the S & P 500 companies that have already reported profits are half the price of the index. The results have been impressive so far.
Nearly 80% of companies reported bottom line results that exceeded Wall Street expectations, above the three-year average of 71%, according to Credit Suisse.
Wall Street is not out of trouble yet profits, though.
Simple expectations are not enough to please shareholders these days.
Companies that earned earnings estimates have accumulated less than 1% on their earnings response days, according to Bespoke. This is less than half the average profit for one day of 1.9% compared to the previous two decades.
Companies that lost their earnings estimates this month fell an average of 4.6 percent from the historic average of 3.5 percent, according to a study published today by Bespoke Investment Group.
One major area is the company's income, which has so far lagged behind.
Only 54% of the companies that reported the results beat earnings estimates, according to the Spock investment group.
"It's definitely a concern," analysts said.
2. Fed guidelines: The Federal Reserve held its April and May meeting on Monday, culminating in the interest rate decision and its policy update on Wednesday at 14:00.
The prevailing assumption is that the central bank will not change the interest rate. The CME FedWatch shows that the market sets a 98% chance that the rates will remain on hold. Still, the meeting can be fluid. Investors will take note of Federal Reserve Chairman Paul Powell's opinion on the economy.
After raising interest rates four times last year, the Fed took its foot in the gas in January, throwing the financial markets into madness. Investors began to wonder whether the next step for the central bank will cut interest rates again, which aims to stimulate the economy. On the other hand, Friday's output was supposed to emphasize these concerns, at least for the time being. The United States reported growth of 3.2% between January and March, along with muted inflation. This gives the Fed a little more wiggle room to let the economy run the course.
3. Jobs, Jobs, Jobs: A lot of key economic data on the agenda of the week, including personal income, manufacturing and trade data. It can be argued that the most important, however, is the Friday jobs report, due at 8:30 ET, which includes non-farm payroll and hourly wages.The unemployment rate is expected to remain flat at 3.8%.
Last month, the headline figure was better than expected, but wages lagged behind.
Wage inflation was stubbornly low, to the dismay of market participants and central bankers. The Fed's inflation target is about 2%, but the number of wage inflation raises questions about the use of inflation targeting.
Ahead of the report on the employment situation, unemployment claims for the week ending April 27 are due Thursday, with claims expected to be 215,000, according to Refinitiv.
4. Dollar King: The Fed's less dovish words, as well as additional economic data that hinder the point that the US economy is healthy, can also stimulate the US dollar higher.
Compared to its peers, the United States is the strongest economy in the block. Unless the euro zone's output this week surprises the slowdown, there is almost no challenge to dollar supremacy. While many good things are priced into money already, analysts say it remains attractive to miss.
On Thursday, the ICE Index reached the highest level since May 2017.
5. Coming this week:
Sunday Milken World Conference is underway in California
All week – Japan's markets are closed until May 6 for the Golden Week. The holiday lasted six consecutive days for the first time this year, which could lead to volatility in Asian markets amid low liquidity.