Photographer: David Paul Morris\/Bloomberg <\/p>\n
(Bloomberg) — As the US earnings season gathers momentum, early results are offering a window into the economic and political crosscurrents shaping Corporate America\u2019s outlook for the year ahead.<\/p>\n
Airlines were among the first to flag risks. Delta Air Lines Inc. struck a cautious tone on profits amid geopolitical uncertainty, while United Airlines Holdings Inc. warned that global tensions could weigh on travel demand. Meanwhile, executives at consumer staples giants Procter & Gamble Co. and McCormick & Co. said shoppers remain cautious.<\/p>\n
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3M Co. fell the most since April after its outlook missed estimates, with the maker of Post-it notes, roofing granules and electronics materials saying the macro environment remained uncertain for its consumer and auto businesses. Signs of strain are lingering in industrial sectors as reports from distributor Fastenal Co. and logistics company JB Hunt Transport Services Inc. disappointed investors.<\/p>\n
The downbeat commentary stands in contrast to many of the headline economic indicators. Data from last year pointed to solid growth and resilient consumer spending. Among S&P 500 Index members that have reported so far, 80% have topped analysts\u2019 expectations as of the close on Thursday, according data compiled by Bloomberg Intelligence.<\/p>\n
Policy uncertainty \u201cabsolutely\u201d overshadows positive news from companies, said Steve Sosnick, chief strategist at Interactive Brokers. \u201cIt does make it much harder for management to plan… but what CEO is going to say, \u2018the policy instability coming out of the White House is making it very difficult for me to manage my business?\u2019\u201d<\/p>\n
Companies are reporting results amid a rare convergence of political disruption and global uncertainty. Stocks are trading at high valuations after the S&P 500 clocked in three straight years of double-digit growth, leaving little room for error.<\/p>\n
Corporate executives now face the tough task of laying out the companies\u2019 outlook for the year ahead as President Donald Trump continues to reshape the country\u2019s trade relations and international policy.<\/p>\n
\u201cThe environment across our key markets is marked by volatility and continued pressure from inflation, geopolitical and trade uncertainty\u201d and the risk of rising unemployment, McCormick Chief Executive Officer Brendan Foley said on a conference call on Thursday. \u201cOverall consumer confidence remains low.\u201d<\/p>\n
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Shares of the spice and seasoning maker slid the most in two years after both fourth-quarter earnings and its outlook for the year fell short of expectations.<\/p>\n
Procter & Gamble, the maker of Pampers diapers and Tide detergent, noted similar disruptions, though it expects sales will increase in the next six months. Both P&G and McCormick said sales were hurt by the government shutdown, which temporarily halted food-aid programs and weighed on lower-income consumers.<\/p>\n
In industrials, companies pointed to lingering demand headwinds. Fastenal\u2019s chief financial officer said the US economy \u201ccontinued to send mixed signals, especially in the industrial sector.\u201d At JB Hunt Transport Services, executives said the freight market remains shaky at the start of the year \u2014 even as immigration policy constrains labor supply, a dynamic that would typically support higher shipping rates.<\/p>\n
United Airlines said the US military incursion in Venezuela has had a \u201cmeasurable negative impact\u201d on Caribbean bookings, with Chief Executive Officer Scott Kirby warning that geopolitical risks could disrupt what otherwise appeared to be a strong start to the year.<\/p>\n
The Chicago-based carrier also flagged an outsized hit from Trump\u2019s push to cap credit-card interest rates, reflecting airlines\u2019 deep ties to the payments industry through lucrative co-branded card partnerships \u2014 a proposal that earlier in the earnings season sent shares of financial firms lower.<\/p>\n
At the same time, parts of Trump\u2019s policy agenda could offer near-term relief for consumers. Investors are betting that outsized tax refunds and potential stimulus measures may help support spending among lower-income households, at least temporarily. The White House has put affordability at the center of its messaging, from the credit-card initiative to efforts aimed at forcing technology companies to shoulder rising power costs.<\/p>\n
\u201cIt\u2019s a midterm election year, so the rhetoric has already started to come,\u201d said Eric Clark, chief investment officer at Accuvest Global Advisors. \u201cWho knows if it will actually benefit consumers? It might make them feel like there\u2019s help on the way, which ultimately helps sentiment.\u201d<\/p>\n
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