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Brace yourself, here comes earnings season.
Alcoa’s quarterly report, due tomorrow after the closing bell, is considered the unofficial beginning to earnings season. Unfortunately, earnings may not be the catalyst investors need to halt the recent pullback in the stock market.
MarketBeat colleague Jonathan Cheng offers a preview in today’s paper:
Analysts have been lowering expectations for both first-quarter and full-year earnings. They now expect earnings to show average growth of 0.95% over a year earlier in the first quarter.
That would be the lowest rate of year-to-year growth since the end of the financial crisis, and down from expectations of 4.5% in early January, according to S&P Capital IQ. As recently as late September, analysts were looking for 10% growth.
By comparison, S&P 500 earnings rose 8.4% in the fourth quarter and 18% in the third quarter.
The Dow is down sharply today after last week suffering its biggest weekly tumble of the year. Friday’s jobs report stoked fears that the economy may not be improving as much as economists previously anticipated. Additionally, Spain’s weak bond auction last week prompted concerns that Europe’s woes may be poised for a comeback.
With these concerns intensifying, earnings over the next few weeks may not provide much comfort for investors.
“Expectations for the first quarter are set rather low,” Bank of America Merrill Lynch strategists said in a note research.
Additionally, the firm warns that corporate guidance also isn’t looking so hot.
“Management guidance — which is typically a leading indicator of estimate revisions — [has] showed some worrisome trends since January,” the firm says. “Management is now guiding down more than twice as much as up.”
The number of companies in the S&P 500 that issued guidance last month was the second lowest monthly total since 2000, BofA says.
Maybe companies are living by this age-old adage: If you don’t have anything nice to say, don’t say anything at all.
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Hey Steven, What about the adage: “What goes up must come down”? Chad in CO
MarketBeat looks under the hood of Wall Street each day, finding market-moving news, analyzing trends and highlighting noteworthy commentary from the best blogs and research. MarketBeat is updated frequently throughout the day, helping investors stay on top of what's happening in the markets. Lead writer Steven Russolillo spearheads the MarketBeat team, with contributions from other Journal reporters and editors. Have a comment? Write to marketbeat@wsj.com.
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