Whole earnings for S&P 500 corporations could have declined as a lot as 6.8% in the course of the first quarter relative to the identical interval final 12 months, in accordance with estimates by monetary knowledge agency FactSet printed final week. That may symbolize the biggest drop for the index because the second quarter of 2020, when the early waves of COVID-19 infections and pandemic lockdowns wreaked havoc on U.S. GDP and shaved almost 32% from complete earnings.

Though that type of drop is unlikely to occur once more and not using a main international disaster, out of 106 corporations listed on the S&P 500 which have already reported steerage for his or her efficiency within the months forward, 78 have issued destructive steerage, the best quantity in 4 years, in accordance with the FactSet report. March’s banking disaster has rocked confidence within the monetary system and the economic system, whereas recession forecasts are making the rounds as soon as once more. Analysts can be targeted on the three banks—JPMorgan Chase, Wells Fargo, and Citigroup—reporting earnings Friday earlier than markets open as an indicator of how the remainder of the season may go.

“The troubled banking sector kicks off earnings season in full this week, doubtless highlighting the unstable backdrop. The banks are often among the many first excessive profile corporations to report earnings in the beginning of every season, which is especially apt given the turmoil on this sector following the takeovers of Silicon Valley and Signature banks final month,” Jason Pleasure, CIO of personal wealth at funding administration agency Glenmede, advised Fortune.

After a lucrative 2021 for income, shares slumped final 12 months because the Federal Reserve raised rates of interest to scale back inflation, and 2023 might carry extra ache to markets. The high-interest price atmosphere created by the Federal Reserve over the previous 12 months in a bid to scale back inflation has not completed any favors to income streams at many corporations. Tech companies had been the toughest hit as funding and promoting spending shrunk quickly, points CEOs brought up when reporting earnings earlier this 12 months. 

Massive banks have additionally been dealt a blow, as regardless of strong consumer spending, troubled stock markets around the world have damage funding. Revenues shrunk prolifically final 12 months at banks with massive funding administration arms, resembling Goldman Sachs and Morgan Stanley, and rocky capital markets proceed to plague these establishments. GS and Morgan Stanley are additionally among the many better-known U.S. banks with massive M&A operations, which slowed considerably final 12 months and usually are not anticipated to get well till the top of 2023 or 2024, according to S&P Global.

The banking disaster was a boon for big banks’ revenues, as establishments together with Bank of America and JPMorgan simplified their sign-up processes final month to facilitate the stream of new depositors who had been fleeing small banks at larger danger of collapse. However an inflow of recent deposits might not be sufficient to make up for the consequences of stalling financial progress and tighter lending situations this 12 months, with earnings per share on the six largest U.S. banks projected to say no round 10% from the primary quarter of 2022, Reuters reported Monday citing knowledge from monetary markets knowledge supplier Refinitiv.

“In some methods this quarter’s earnings season will in all probability be déjà vu once more—earnings declines and cautious steerage, reductions in estimates, however higher than feared. Nonetheless, tightened monetary situations within the wake of final month’s banking turmoil and constructing proof for a slowing economic system has modified the financial backdrop this quarter,” Jeffrey Buchbinder, chief fairness strategist at LPL Monetary, advised Fortune.

However counterintuitively, the latest banking collapses might enhance long-term outlooks considerably, because the disaster could push the Fed to slow its tempo of price hikes. Some beforehand down belongings have additionally rebounded in latest weeks, resembling tech stocks, that are bouncing again, doubtless due to the waves of layoffs and dedication to effectivity and robust fundamentals tech CEOs have championed in latest months.

However this earnings season is not going to be unhealthy information for all corporations, and a few sectors are anticipated to learn from how customers are spending their cash, which for the previous 12 months has largely gone to services and experiences rather than goods. The hospitality, restaurant, and leisure sector is projected to report a revenue of $3.8 billion, far exceeding its efficiency within the first quarter of 2022 when it misplaced $829 million, in accordance with the FactSet report. 

However whereas there’ll doubtless be some vibrant spots this earnings season, analysts have additionally warned that the financial institution disaster will take longer to trickle by way of the economic system. 

“Since latest financial institution failures occurred in the previous couple of weeks of the quarter, the total impression gained’t register in first quarter stories,” Goldman Sachs analysts wrote in a word reported by the Monetary Instances Monday.