The stock market rally is sputtering. Earnings season could revive it

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Stocks have been tumbling this week. Investors are hoping the upcoming earnings season will help bring back this year’s banner rally.

Analysts polled by FactSet expect first-quarter earnings of S&P 500 companies to grow 3.1% from the prior year. That would mark the third straight quarter of earnings growth. Full-year profits are expected to swell about 10.7%.

All three major US indexes have notched repeated record highs this year after a gangbusters 2023, despite hot inflation data and hawkish Federal Reserve chatter forcing Wall Street to pull back its expectations for six interest rate cuts this year to three.

Some traders credit strong fourth-quarter corporate earnings and the resilient economy for fueling optimism that the US will avoid a recession and in turn the market’s continued surge.

But stocks began tumbling just after notching their best start to the year since 2019. The S&P 500 has fallen 2% this week after hot inflation data and warnings from Fed officials raised concerns that long-awaited rate cuts could come later than expected. Elevated bond yields and spiking oil prices are also weighing on stocks.

The first-quarter earnings season could get the stock rally chugging along again, some investors say.

“If we can see corporate earnings continuing to move higher, ultimately that provides the catalyst for the market to continue to work,” said Matthew Stith, director of equity research at Bartlett Wealth Management.

Earnings season kicks off next week with quarterly updates from Delta Air Lines, Citigroup, BlackRock, JPMorgan Chase and Wells Fargo.

Investors will parse the reports for clues that consumer spending continues to be strong. Recession fears have waned in recent months as the jobs market stays resilient against interest rates being held at a 23-year high. But Americans’ attitudes towards the economy have soured and lower-income consumers have pulled back their spending, painting a mixed picture of the economy’s health.

“Earnings season is likely to show a bifurcated market where many companies are thriving, but an increasing minority are struggling,” wrote Yung-Yu Ma, chief Investment officer at BMO Wealth Management, in a Wednesday note.

Wall Street will get a glimpse of the economy’s strength when the latest jobs report is released on Friday morning. Economists project that the US economy added 200,000 jobs in March, according to Factset.

Latino immigrant workers died on the Baltimore bridge. More will likely rebuild it

A group of six Latino immigrant workers fell to their deaths while working on Baltimore’s doomed Francis Scott Key Bridge last week.

When work begins to rebuild it, more Latino immigrants will almost certainly join the effort to reopen the crucial transportation artery, report my colleagues Ramishah Maruf and Gloria Pazmino.

Latino workers make up about a third of America’s construction industry, according to the Bureau of Labor Statistics, a huge overrepresentation considering they make up just 19% of the overall American population and 17.6% of its workforce. More than two-thirds of Hispanic construction workers in America are foreign born.

For the millions of recent Latino immigrants in the US, construction jobs have low barriers to entry and the openings are plentiful. Stable construction jobs can also allow a path to upward mobility.

“We’re not just here trying to change our lives and achieve our goals and dreams. It’s also everyone we have left behind in our countries, we sustain them, we help them,” construction worker Reinaldo Quintero said to CNN. “We are the ones people call when they’re sick, when they can’t afford food.”

Read more here.

Disney+ will crack down on password sharing in June

Disney is curbing password sharing for its Disney+ streaming service as part of a larger effort to boost signups and revenue, reports my colleague Samantha Murphy Kelly.

CEO Bob Iger, in a CNBC interview on Thursday, said its popular Disney+ streaming service will start cracking down on password sharing in June in some countries and more broadly in September. Although Disney+ and Disney’s other streaming services explicitly require customers to agree not to impersonate someone else by using their username or password, the company hasn’t been broadly enforcing its policy.

Hulu, one of Disney’s other streaming services, began limiting how often customers can share account login information outside their households starting on March 14.

The crackdown comes as its rival Netflix has attributed a jump in signups from its recent crackdown on password sharing. Shortly after the crackdown went into effect last May, Netflix added 100,000 new accounts the following two days, according to data from Antenna. Netflix had also achieved a more than 100% increase in sign-ups from the prior 60-day average.

A similar boost at Disney could help move the company’s streaming platform toward profitability. Disney+ continues to lose money, although the company said it expects to turn a profit soon.

Read more here.