National Bank Financial says that earnings momentum is still outstripping the drag created by high energy prices.

‘There is a lot of nervousness in financial markets related to the rising price of oil and its negative impact on earnings,” it notes.

However, NBF says, “At this point, it appears that strong economic momentum still has the upper hand on energy prices. Indeed, First Call estimates published last Friday show that S&P 500 earnings are still being revised upward and are now on track to post 24% year/year growth in Q2 (down slightly from 28% in Q1).”

The firm notes that pre-announcements remain extremely favourable with the ratio of negative to positive running at 0.8 for S&P500 companies. That compares to a ratio of 1.4 in Q1 and a 2.3 long-term average.

“Interestingly, there has not been downward revisions in sectors where energy is a significant input. This suggests that firms may have more pricing power than previously believed,” it concludes.