The fear of an earnings recession has all but faded. Many analysts are saying that the first quarter was a trough.
Earnings from a diverse group of names on the S&P 500 are reporting better-than-expected with better than normal gains. They are beating estimates by a 3-1 margin, boosting the index to near record highs. The S&P 500 rallied on Tuesday, touching its all time high of 2,930 by midday trading. This rally was not expected a month ago when so much negative news was priced into the market.
While the first quarter reporting season well underway, with about 20 percent of the S&P 500 reported. This quarter was expected to be anything but normal, with companies expecting the first decline in profits in three years. Companies have beat estimates at a pace of three-to-one, much in line with a normal. quarter.
The market was concerned about a recession but it has become clear that these fears were oversold in the market, too many people were disconnect from the reality of the market. The very early earnings reports were very strong indeed. So markets have rallied as as result.