The "Disastrous" Earnings Season Coming! All Eyes On Apple

• Wall Street is generally pessimistic about earnings season as they believe stocks are still not fully pricing in all the risks. There is still room for further declines in US stocks.
• Investors also need to pay particular attention to $Apple(AAPL)$ performance as a bellwether for the state of the global economy.

1. The background of Q3 Earnings Season

Corporate profits are likely to suffer amid continuing rising costs, lower demand and a stronger dollar.

So far this year, the $S&P 500(.SPX)$ has fallen more than 24%, possibly the worst annual performance since the 2008 financial crisis.

Wall Street is now concerned that the already plunging stock market still hasn't fully priced in all the risks associated with aggressive central bank tightening as inflation remains high.

Companies from a variety of industries, in recent weeks, have called out a slowdown in demand. some have issued impromptu profit warnings.

2. Wall Street's collectively downgraded Earnings Season guidance

1) Bank of America's strategist Savita Subramanian cautions

It's guidance. Guidance is likely to matter most, and we see substantial downside risk to 4Q and 2023.

We expect guidance to weaken even further going forward and more downward revisions across the board.

2) FactSet's data shows that

Analysts lowered their third-quarter earnings estimates for the S&P 500 by 6.8%, the largest drop in expectations for the reporting period since the second quarter of 2020.

3) According to Refinitiv,

Fourth-quarter earnings estimates for the S&P 500 have already been reduced in half since July 1 -from 10.6% growth three months ago to current 5.2%.

4) Citi strategists expect that

Global earnings will decline 5% year-over-year in 2023, in line with below-trend levels of global economic growth and rising inflation. Citi's downgrades on the U.S., Europe and Global outweigh its upgrades, with the largest downgrade on the U.S.

3. Apple is the focus of this earnings season

Investors generally agree that special attention needs to be paid to Apple's earnings performance. $Apple(AAPL)$ will report earnings on Oct. 27.

For stocks to watch in the coming weeks, the media cited an MLIV Pulse survey showing that 60% of respondents believe Apple is critical.

Apple is the most heavily weighted company in the S&P 500 and is seen as providing clues to movements in a range of economic indicators, such as consumer demand, the supply chain, the impact of a surging dollar and rising interest rates.

Also, in this tough macroeconomic environment, nearly 40% of respondents prefer to invest more in value stocks and 23% prefer to invest in growth stocks. When interest rates rise, the earnings outlook for growth stocks becomes more fragile.

How do you expect Q3 Earnings Season?

Are you pessimistic or optimitic on it?

Will Apple help turn around the broader market?

Share your thoughts in the comment section to win tiger coins~