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Goldman Sachs: The stock market's biggest driver will plunge 123% in a brutal 2nd quarter

Goldman Sachs: The stock market's biggest driver will plunge 123% in a brutal 2nd quarter
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Profit growth for S&P 500 companies is set to slip 33% in 2020 as the coronavirus lockdown halts revenue streams, Goldman Sachs said.




Earnings-per-share growth is historically stocks' biggest upward driver, and the metric will slide by 123% in the second quarter amid the strictest nationwide containment efforts.




Declines across the energy, consumer discretionary, and industrial sectors will weigh on the broad index, while tech, healthcare, and utilities companies are the best positioned amid the economic turmoil, the team wrote in a note to clients.




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Corporate profit growth — historically the biggest booster for stock prices — will experience three consecutive quarters of heavy contraction as the coronavirus outbreak strangles revenues, according to Goldman Sachs.
The investment bank expects S&P 500 earnings-per-share expansion to slide by 33% in 2020, with poorly performing energy, consumer discretionary, and industrial firms' underperformance weighing on the broad index. Profit margins that stood near record highs at the start of the year will fall to 8.7%, the team of analysts said, their lowest level since 2010.
The biggest hit to earnings will arrive in the second quarter, when mass unemployment, business closures, and quarantine activity plunge demand to an unprecedented low. The three-month period is expected to bring a 123% decline to earnings growth before sliding another 21% in the third quarter, the team led by Ryan Hammond wrote in a note to clients.
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