Global economic uncertainty overshadows strong earnings due to rising costs, weak sentiment, and trade tensions

From Yahoo Finance: 2025-05-17 07:00:00

As the first-quarter earnings season wraps up, the uncertain global economic outlook overshadows better-than-expected results. Companies in the US, Europe, and China are revising forecasts due to rising costs, weak consumer sentiment, and trade tensions. Despite strong profits, profit guidance momentum is at its lowest since 2010 in the US.

In Europe, earnings growth expectations have slowed, even as companies exceed projections. In China, earnings forecasts have dropped due to Trump’s tariff blitz. European firms with grim outlooks are underperforming, indicating tariffs haven’t been fully factored in. China’s earnings picture remains uncertain due to low inflation.

Stocks have surged amid US-China trade tensions easing. Companies are preparing for different tariff scenarios, with investors rewarding those with lower exposure. No industry is safe from tariff impact, with Walmart, Deere & Co, Alibaba, and Daimler among those affected. Tariff mentions in earnings calls hit a record high.

Tech companies, particularly AI firms, show resilience. The Magnificent Seven tech companies perform well, easing tariff fears. In Europe, ASML Holding NV’s bookings disappoint, while SAP SE signals strong demand for cloud-based software. Overall, tech companies perform relatively well in the first-quarter earnings season.

Read more: Grim Economic Outlook Overtakes Solid Earnings as Tariff Disruptions Surface