Earnings for the second quarter will heat up this week, with more at stake than usual as they represent a fuller picture on how tariffs are actually affecting businesses and consumers.
The consensus estimate on Wall Street is that earnings from S&P 500 companies grew just 4% in the second quarter from a year ago, the slowest pace since 2023 and down from first-quarter growth of 13%.
The consumer price index will come out on Tuesday, and analysts expect a 0.3% monthly increase for June, up from May’s 0.1% pace. The producer price index is due on Wednesday, and is also expected to show acceleration to 0.2% from 0.1%.
The uptick could be a due to companies running out of inventories that were stockpiled ahead of the tariffs, forcing them to incorporate more of those costs in the price of their goods.
Capital Economics said last week that Wall Street doesn’t see Corporate America shouldering much of the future tariff burden, and exporters don’t appear to be cutting their prices aggressively to offset the tariffs.
That 10% target looks increasingly optimistic, as Trump has continued to push for aggressive rates. Goldman Sachs expects the effective rate to eventually settle around 17%.
Capital Economics said last week it suspects U.S. firms will eat more costs, “if only in the short run for political reasons.”
Either way, the upcoming earnings reports will reveal more definitively who is eating how much. More pain on the consumer side could fuel inflation and prevent the Federal Reserve from lowering rates, weighing on the stock market. More pain on the corporate side will erode earnings—and also weigh on the stock market.