Wall Street analysts are cutting earnings forecasts for U.S. companies as concerns mount that the Trump administration’s trade policies and federal spending cuts could hinder economic growth.
The S&P 500’s first-quarter earnings outlook has fallen by 4.5 percentage points since January 1, marking the sharpest downward revision since late 2023, according to a senior research analyst at LSEG.
Analysts now anticipate that S&P 500 companies will achieve earnings growth of 7.7% year-over-year, a decrease from 17.1% in the previous quarter and the lowest growth since mid-2023. The stock market has already reacted, with the S&P 500 officially entering a correction on March 13 after dropping more than 10% from its February 19 peak.
Among the biggest contributors to the reduced outlook are Apple, Tesla, and Ford Motor, along with insurance companies impacted by California wildfires. Apple recently reported strong earnings but faced sluggish iPhone sales and declining revenue from China due to increasing competition and slow adoption of AI features. The company is also losing over $1 billion annually on its Apple TV+ streaming service, according to The Information.
Tesla’s sales have weakened in Scandinavia and France, and CEO Elon Musk’s stance on federal spending cuts has sparked discussions around brand loyalty. The EV maker’s shares have fallen nearly 40% this year yet still trade at more than 80 times forward earnings. The company’s earnings per share estimate for the March quarter has dropped from 70 cents to 47 cents since January.
Meanwhile, Ford expects up to $5.5 billion in losses on its electric vehicle and software operations in 2025. Automakers remain focused after the White House announced a temporary exemption from Trump’s 25% tariffs on Canadian and Mexican imports.
Beyond tech and automotive, insurers are preparing for heavy losses from January’s wildfires, with Travelers Companies reporting $1.7 billion in pre-tax catastrophe costs. Airlines have also faced challenges, as Delta Air Lines and others have cut earnings forecasts due to worries about consumer spending.
While first-quarter earnings reports are still weeks away, investors hope corporate results can serve as a catalyst for market recovery. The S&P 500 remains costly at 21 times forward earnings, well above its 10-year average of 18.
