Intel stock spikes after report of possible US government stake
Investing.com - The second-quarter earnings season is likely to show the first material impact on Corporate America from an incremental rise in U.S. tariffs, according to analysts at Barclays (LON:BARC).
In a note to clients on Wednesday, the brokerage said the effect is appearing in negative Wall Street revisions and expectations for "margin degradation."
Changes to estimates for S&P 500 firms, excluding technology names, are "trending significantly worse than average," the analysts said, adding that most of the cuts occurred after the threat of President Donald Trump’s aggressive trade agenda intensified in March.
Trump’s elevated "reciprocal" levies on a host of countries are due to take effect on August 1, while the president has said his heightened duties on pharmaceuticals will likely be unveiled by the end of the month.
Economists have warned that the tariffs could drive up inflation and weigh on growth. While economic activity has remained broadly resilient, consumer price data on Tuesday suggested that inflation may be starting to accelerate once again, particularly in goods like apparel and toys that are more exposed to the tariffs.
Most cyclical stocks, which are viewed as more easily swayed by broader economic trends, are anticipated to unveil contraction in per-share income versus a year ago during the quarter, the Barclays analysts flagged. Discretionary, materials, and industrials sector stocks are seen as especially exposed.
As a result, the analysts predict that mega-cap technology companies will continue to play an "outsized role" in earnings per share growth in the benchmark S&P 500.
Although worries around plans to spend heavy on artificial intelligence have swirled around these businesses throughout 2025, signs are emerging that Big Tech is making progress in delivering on monetizing its AI ambitions, the analysts argued.
They noted that Big Tech is also trading at a smaller-than-average premium to the wider S&P 500 index, and is a "few turns lower" than where these stocks started the year.
Still, buyers are looking for "upside other than" in technology, the analysts said, with both large-cap and small-cap value names outperforming the S&P 500 month-to-date.
"We believe a clean earnings season could go a long way toward justifying a continuation of this trend," they wrote.
Earnings season kicked into gear this week, beginning with a slate of results from major banks that received a mixed reaction from investors. By Friday, one-third of the financial sector and 90% of U.S. banks are due to have reported their latest returns, as well as 12% of the S&P 500 index.