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PNC: Q2 Earnings 'The Better Gauge'


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For the first time since the 2008 financial crisis, corporate earnings could turn negative, according to PNC Financial's Amanda Agati.

What Happened

Corporate earnings for the first quarter are set to kick off on April 14 and shouldn't be considered "the right guide" for any coronavirus recovery, Agati said on CNBC's "Trading Nation." The virus started to pick up momentum late in the first quarter so the second quarter will likely be "the better gauge for where we go from here."

Heading into 2020, consensus estimates called for S&P 500 earnings to grow by 10% for the year, according to Agati. The figure has since been slashed in half, but Agati expects further reductions to earnings growth.

So far, the Street is expecting first-quarter earnings to be "negative territory at about 1.5%," followed by "Q2 will be down about 1%," she said.

Why It's Important

Meanwhile, valuations have also fallen from February when the S&P 500 index was trading at 19 times forward P/E to just under 14 at current levels, she said.

"We're not viewing valuation as a very good gauge or timing tool for relative attractiveness," she said. "It's all going to come down to the earnings backdrop."

Investors hoping for any sort of encouraging sign moving forward may be disappointed. The market has shown "tremendous multiple contraction over a very short span of time," she said. Before being buyers, the Volatility Index needs to "settle down" as it's a "reflector of fear and uncertainty."

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