Wall Street's Outlook Deteriorates in the Second Quarter, With Forecasts Cut by a Larger Margin Than Usual

Wall Street remains uncertain about how the U.S. trade war and ongoing international negotiations will ultimately affect the economy, but analysts are beginning to show signs of increased caution. A recent report from FactSet highlights that analysts trimmed their second-quarter profit forecasts more than usual last month—a move that reflects a more pessimistic outlook amid a swirl of economic pressures.

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According to the report, earnings per share estimates for companies in the S&P 500 were reduced by 2.4% between March 31 and April 30. This decline is steeper than the 20-year average of 1.9% typically seen during the first month of a new quarter.

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While it’s common for analysts to lower estimates gradually to match real-world conditions—or, as some skeptics argue, to create lower targets for companies to beat—this sharper-than-usual adjustment suggests deeper concern over current economic headwinds.

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The first quarter of the year saw the U.S. economy contract for the first time in three years, a downturn driven by post-holiday consumer fatigue, harsh winter weather, inflation concerns, new tariffs, and federal spending cutbacks. Additional uncertainty arrived early last month when President Donald Trump introduced sweeping tariffs on a wide range of imports. While some adjustments and exemptions followed, the initial announcement sent shockwaves through the markets.

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Despite the overall anxiety, there were a few bright spots. April’s jobs report exceeded expectations, and the S&P 500 managed to bounce back from the losses it suffered following Trump’s “Liberation Day” tariff declaration on April 2.

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Among the major companies reporting first-quarter earnings, Amazon offered some reassurance. CEO Andy Jassy said the company hadn’t seen any reduction in consumer demand. In fact, some categories showed increased buying, possibly as a reaction to looming tariffs. Jassy also emphasized that prices for retail items had not noticeably increased, and that demand for essentials remained high, accounting for a third of U.S. sales. Amazon's broad network of sellers, he added, provided customers with more price options than competitors.

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Still, some analysts remained cautious. Dylan Carden of William Blair noted Amazon’s strong reliance on goods either made in China or imported by U.S.-based sellers from China. He warned that prolonged trade tensions could still present significant risks. One particular area of concern is the administration’s plan to close a loophole that currently allows many inexpensive imported goods to bypass import taxes—an issue with major implications for e-commerce.

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While Amazon’s financial outlook wasn’t enough to excite investors, Sheraz Mian from Zacks noted that things could have been far worse. Other analysts agreed, with Wedbush remarking that Amazon appeared to be “doing just fine,” and Bank of America analysts suggesting the company was well-prepared to weather any tariff-related turbulence. “This too shall pass,” they concluded.

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Looking ahead, earnings reports from 92 S&P 500 companies are due in the coming week. Among them are amusement park operators Walt Disney Co. and Six Flags, whose performance could indicate how the trade dispute is impacting consumer spending on leisure. Disney’s results may also offer clues about the state of international tourism and potential backlash against U.S. policies.

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In the media sector, results from Disney, Warner Bros. Discovery, and Paramount Global will be closely watched, especially as the entertainment industry faces cutbacks and regulatory pressure. The New York Times will also report earnings during what has been a turbulent news cycle, while private prison operator GEO Group may shed light on the administration’s immigration enforcement push.

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Gig-economy companies like Uber, Lyft, and DoorDash will also deliver results, alongside household brands Tyson Foods and Clorox, which may offer insight into consumer spending on everyday items. Meanwhile, electric vehicle maker Rivian’s report follows a disappointing quarter from Tesla.

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Other companies scheduled to report include Palantir Technologies, Hims & Hers Health, Electronic Arts, Super Micro Computer, AMD, Dutch Bros, AMC Entertainment, Molson Coors, Planet Fitness, Crocs, Peloton, and Coinbase.

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One of the more symbolic earnings announcements this week comes from Mattel, the toy maker behind Barbie. With Trump suggesting that children might have to settle for fewer toys due to tariff-related supply issues, Mattel’s report could offer a clearer picture of how the toy industry is coping. The Toy Association has already warned that tariffs on Chinese-made toys could threaten holiday sales and push small manufacturers out of business.

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Analysts note that Mattel and rival Hasbro may be more shielded than others due to efforts to reduce dependence on Chinese manufacturing. Hasbro has focused on cost savings and its fantasy gaming segment to mitigate the impact of tariffs. Mattel had earlier attempted to estimate the tariff effects, though those projections came before Trump’s latest round of import taxes.

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Another key report will come from Ford Motor Co. After General Motors recently cut its profit forecast and warned that tariffs could cost the company up to $5 billion, all eyes will turn to Ford’s CEO James Farley.

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Though the White House has since introduced measures to soften the blow for automakers, Farley emphasized the need for a more comprehensive policy approach. He had previously warned about the chaos and rising costs that come with long-term tariffs on trade partners like Canada and Mexico.

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Overall, while markets continue to adapt and find reasons for optimism, Wall Street remains on guard amid ongoing trade tensions and policy shifts.

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