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Prospects for corporate earnings are dimmer in the coming quarters — even though reports so far this quarter have been relatively bright.
Third-quarter reports among the big names have been reasonably solid, with Google, McDonald's and others reporting strong results.
But unless there is a turnaround in the outlook for the U.S. economy, the next few quarters may be less rosy.
Currently, the market is focused on Europe. Hope for a series of summits designed to find a way to solve the growing euro zone debt crisis buoyed the Standard & Poor's 500 index to a 1.1 percent gain for last week and put the index at the top of a recent range it has struggled to break through.
With so much focus on Europe, earnings — even with most companies beating expectations — have been given less of the spotlight.
At the same time, S&P 500 earnings forecasts for the fourth and first quarters have come down since the start of October, especially in the materials, energy and financial sectors, according to Thomson Reuters data.
"That's part of this fear factor that has gripped not only the marketplace but corporate America as well," said Peter Cardillo, chief market economist at Rockwell Global Capital in New York.
Much of what's driving worries about earnings is related to expectations for less demand from Europe and other parts of the world, including China, where indicators show growth is slowing.
The sovereign debt crisis in Europe has plagued markets for months, and the U.S. economy has been a worry, too, with the nation's high unemployment rate among the chief problems.
Much of the third-quarter profit strength stems from still-strong international revenue growth, according to a report from Thomson Reuters earnings analyst Jharonne Martis.
"There is still a dichotomy between robust earnings growth and global economic uncertainty," the report said.
Foreign sales total 30 percent on average for S&P 500 companies.
Of the 133 S&P 500 companies that have reported earnings to date, 68 percent have come in above expectations, above the long-term average, the Thomson Reuters data showed.
On this week's earnings agenda are results from more top S&P 500 names: Caterpillar, Coach, Boeing and Procter & Gamble Co among others.
The data shows S&P 500 earnings are expected to have risen 14.7 percent in the third quarter from a year ago, compared with an Oct. 3 estimate for 13.1 percent growth.
Projections for the fourth quarter are for growth of 12.5 percent — down from an Oct. 3 estimate of 15 percent — and forecasts for the first quarter of 2012 are for growth of 7.6 percent — down from an Oct. 3 estimate of 10.2 percent.
Some analysts said the changes in earnings estimates may just be catching up to sentiment already priced into stocks.
If so, an improvement in the outlook would make the forecasts too low.
"If Europe does satisfy the markets (with a solution to the debt crisis), then I think these estimates will be proven wrong," Cardillo said.
As long as the U.S. economy does not fall back into recession, corporations can deliver profit growth, strategists argued.
Among this week's data is a report on U.S. economic growth on Thursday. U.S. gross domestic product likely grew at a 2.5 percent annual rate in the third quarter, according to a Reuters survey, a improvement from 1.3 percent in the second quarter.
"The general macroeconomic data in the U.S. continues to confirm a protracted, slow painful recovery but not a recession at this stage. And if it continues to maintain that however slow pace, on the upside the earnings should be supported by economic activity," said Natalie Trunow, chief investment officer of equities at Calvert Investment Management in Bethesda, Maryland, which manages about $14.8 billion.
Below, Jack Caffrey of J.P. Morgan looks at market fundamentals and explains to CNBC what he will we watching for next week.
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These people who try to throw water on the fire by "informing" everyone what the market will do months & months ahead MAKE ME ALMOST PUK! They can't even predict what the weather will be tomorrow much less the maket's conduct 6 months down the road. One again, opinion's are like @!$%#$...everybody has one.
I absolutely agree. I truly believe the pundits on cnbc and other "business information stations" are a big part of the problem. Further, often they have their own biases which are evident in the manner in which they present guests and information. I suggest every American should turn them off. They are clueless as to what tomorrow may bring - as are most of us = just like it has been for hundreds of years. Perhaps if few people ran their economic and financial lives based on what these people suggest, the economy would be much stronger.
Stocks are a bubble. According to hundred years of market history, optimism is at record high levels. Dividend rates are all time low. Investors are content by buying and holding companies that are paying record low dividends. Everybody is hoping to buy low and sell to a greater fool at a higher price. That won't work for majority of investors.
www.tradingstocks.net/html/prepare_for_market_crash.html
I think if the media disappeared for six months, the 'financial crisis' would resolve quite quickly.
Oh Eric you took the words Stocks are a Bubble right out of my big fat mouth.
TVAR, ah, c'mon now. These guys know EXACTLY what drives the market. Why, shoot, every single day they can tell that the market went up today because of concern over Greek debt, or that the market went down today because of concern over Greek debt.
Unfortunately, MSNBC, like every other 'news' source today, mixes news in with op eds.
Some may recall that in the 'old days' of news journalism, weather and stocks occupied the last 30 seconds to a minute of a given newscast.
Were we, as a society, less focused on money and those things (like weather) we can't control, we might focus on real life.
But then, that's the grand scheme, isn't it.
It may come as a surprise to TVAR and others, but most investors actually are interested in what the market will do six months or more in the future. I don't know whether this writer is correct, but to think that investors are not interested in the market prospects beyond next week is foolish.
Unfortunately, I think the author may be correct unless consumers in other countries, especially in the Emerging Markets, pick up the slack. Short term moves in equity markets are difficult to predict, but when you look out several years, things do not look great. Forces beyond the control of politics will force whomever is in control of Congress to cut back federal spending. Those cutbacks, wherever they occur, will reduce GDP growth. The result will be continued high unemployment and stagnant wages.
Fortune 500 companies could continue to do OK based on how the rest of the global economy performs. They already get over 60% of their revenue and profits outside the U.S., and that percentage will continue to climb. They will also continue to reduce costs using automation, products from the information technology revolution, etc., and that will help their bottom lines.
Reduce the earnings of CEO's and other so-called corporate leaders and increase the wages of the people actually working for a living and everything will be fine. When 5 people in a multinational account for 5-10% of payroll, that should raise red flags.
Well Mic, if you're a shareholder, then maybe you can help make that happen in some corporations. If you're not a shareholder, then the corporate salaries are really none of your business.
Shareholders have no say on executive pay. Unfortunately the lobbyists blocked that part of the Financial Reform Act from being enacted. The only recourse for a shareholder to corporate malfeasance is to sell the stock.
Mic: Do the math...Divide the salary of the CEO you hate the most by the number of employees and really see how much more each employee will have to spend. I'm amazed at how corporate CEO pay attracts so much petty jealousy while hip-hop musicians, sports stars, and entertainers earn more and we worship them. It's funny how news media talking heads rake in multi-million dollar salaries telling us how terrible CEO's are for making multi-million dollar salaries.
For years I've done the 'right thing' by plugging money into index funds for my Roth and my 401K. Eight years later, I think I'm only 1% ahead of the game. Frustrating.
Yeah bud if you can't pick out individual stocks and are forced into index funds it can suck ! I've had good luck in the market but i bought high yielding defensive companies like Duke Energy , Dominion , PG are my biggest holdings . My father-in-law is in the same boat as you .
Index funds are fundamentally flawed. Because index funds are capitalization weighted, you always end up owning more of the overpriced stocks in an index, and less of the underpriced stocks.
Great Insight.
The Stock market done just like the housing market,once a bubble reaches a certain point it will burst everytime. The housing market boomed with credit easy to get and houses were selling for thousands more than they were worth and it finally got so big that banks could no longer carry the load when defaults began it was down hill non stop. The Stock market has had many good years after deregulation and made monsterous profits but it had to reach an end sooner or later. What goes around will come around.
Don: I think it was the excessive leverage in real estate and the greed of the "flippers" combined with widespread fraud among local apprasiers and lenders that caused the real estate bubble. TV commentators encouraged people to buy houses and increase leverage by borrowing against the "equity" in the inflated home values. The stock market does not allow the same degree of leverage, and while examples of fraud exist, it is not nearly as widespread as the real estate market.
When are you mf's going to stop call people that play the stock market. The sob's are merely gamblers that do not want to go to las vegas to gamble. Or maybe they do both. My view of the economy is that it is based on production and not simply whether the gamblers had a great day or not.
If you a insider trader or a congressman your making money in the rigged game.
Have you noticed that every article on the economy is doom and gloom. After this rally you'd think you'd see an article saying 'Wow, this has been a great week for the market. It gives hope. Of course we all know we're in turbulent times, so I wouldn't get overly optomistic, but it was nice for a change.' But instead we hear: 'This week was a fluke. Don't get used to it because the bottom will fall out of the market soon. Kind of gives you the feeling that, instead of reporting the news, the media is trying to create it, to control it. Bad news is good news for the media, so lets put a negative spin on all news so it becomes a self fulfilling prophacy. Personally, I enjoyed this week. Do I think it will continue? It'll go up and it'll go down. The only way it will hit bottom though is if the media can make it happen. I believe the numbers. A short time ago the DJA was threatening the 6,000 mark. Now it's looking at 12,000. It was once at 14,000
Here's my latest clever strategy-- bought WFC before the housing crash-BA just before their "big contract" actually lowered their stock, and worst of all, BBY the day before their CEO'S got busted cooking the books. I'm in a class action with them, good luck. They crashed $7 or $8 per S. Sold ATT a few days back , and then their stock shot up. Got J&J a few days back and they look hopeful. Holding DVN, they're certain to continue going up.
O'bama's foreign policies kicking butt, stock market up 270 points, protest marches for the little guy, seeger/guthrie, starting to look like America again!
Stick it, commenting is just to much trouble
Yep, george tunney, America is back! :-D
I'm growing weary of MSNBC's Sunday predictions for the market week ahead. Last Sunday it was "the market is in for a rally because of earnings" and the Dow barely eeked out a gain for the week. Come on MSNBC, at least take these "predictions" stories off the main page and bury them in the Horoscope section where they belong.
Neutralize the t-tards so that O'bama can kick butt at home in 2012!
Biden/Clinton carry it forward in 2016!
What scares me the most is that I think you are serious.
Oh absolutely, anything but tell the truth, rose colored glasses and rah,rah, bim, boo, baa cheer leading and ignoring the facts, even when doing so might mean you have involved yourself in a criminal offense, is what got us in this mess in the first place. On the other hand, I love to see the bubble getting bigger and bigger because when it pops .......again, maybe we'll see some more greedy, shady "investors" jumping out the windows on Wall Street. Maybe that's what they mean by "trickle down economy <G>". SPLAT!!!!!. The market right now is nothing more than casino gambling. The Ponzi scheme is about to collapse so yes, boys and girls, get in while you can so the big boys and hedge funds can clean you out ....... again. By all means, don't let the facts get in the way. I love to watch the rich gut each other.
When has there ever NOT been a bubble?
When has it ever NOT been about perception over substance?
When have "good" and "bad" rumers NOT been leaked to create volitility for profit sake?
Good point! There has always been a bubble in some sector of the marketplace, and there have always been sectors that are underpriced. The trick is to sell what the news media loves, and buy what they hate...
Plain and simple. The statics from sources of FINANCIAL and GOVERNMENT,---CANNOT BE BELIEVED!! Financials' and corporate CFO officers, plus the government---COOK THE BOOKS!!!! The result is---"EVERYTHING IS OK, "Don't worry, it's alright"!! BULL, I say!!!! it's ALL A BIG FAT LIE!!!!
SIGNED: DANIEL L. BUSHEY
These guys are ALWAYS wrong. Dow12500 by Thanksgiving after Europe kicks the can down the road yet again and bonds continue to suck as an investment
Not long ago they were saying gold at $2500 by years end. Then they changed it to $2100. $1700 would be lucky now
They said the Euro would go to parity.. I'm still WAITING. A fortune could have been lost if you had boughten into the parity arguement
Sweet! The message is "Enjoy rolling in the Bullsh!t as you will be rolling in the Bearsh!t soon!"
IOW despite good earnings posted, we're still so heavily invested in Greece and other bad loans that we still have a problem.
Stocks would skyrocket if Europe comes up with at least a half assed solution and the bipartisan committee agreed on budget cuts, 13750 by Feb 1 IF both things come to pass. You could quickly make 50% on a lot of stocks such as GE, BAC and MS ------If not, 10,500 Jan 1
Bottom line, long term investment sucks/ Dow at the same level, basically, in 1999. That means you have anxiously watched stocks go up and down for over a decade for nothing, OR ,if you just put your DOW portfolio in a drawer in 1999, man are YOU in for a surprise if you open the latest statement in the mail. NADA ! Meanwhile a 20 year cd at 5.4% in 1999 would have you with an 87% gain --- so far.
Did anyone buy a 20 year CD? At 5.4% in 1999? First time I have heard of that length.
Buying stable dividend stocks would have also given you a handsome profit at a 15% tax rate. There are hundreds of utility and consumer staple stocks paying over 4% and increasing thir dividends. There are MLP's paying over 6% that allow huge tax advantages.
That's why I don't agree with the "rich getting richer" thing.
America is on it's back.
Couldn't agree more. Let the good times roll!
I am an individual investor with no training in the market except what I learned by muself. I make an average salary of middle America. I have invested, over the years, a little bit each month in individual stocks and mutual funds. I invest in good companies who pay consistant dividends over many years, sometimes over 50 straight years. I reinvest those dividends. I am very well to do. I have a small fortune that is still growing today. It has gone up and down, but I always come out ahead. The people who buy and sell trying for that golden stock trade or sell when they see their nest egg devalue for a few months are the ones I see who are financial failures.
Congratulations! You are a smart guy who understands investing.
Corporate America has their own future in their hands. They have chosen not to invest in people, and jobs, instead hoarding their massive profits over the past several years. Now it is catching up to them. Should they choose to start working to rebuild the economy, things would change. So many solutions are available in the public and private sectors, including tax revenue increases, tax reform, and cutting waste, but the GOP knows only two, more tax cuts for the Rich, and spending cuts ( guaranteed to slow the economy down, and create a new recession aiding the Tea Party in immediately balancing the Federal Budget) Perhaps Corporate America will figure out that they need the Middle and working class to buy their products and services and instead begin to hire and work to solve our mutual problems instead of hording profits and buying back their own stock.