'Dismal earnings ahead'

"An ominous cloud is about to hover over the stock market's feel-good 2012 story: Earnings season, which begins in just a few weeks, is shaping up to be the worst since the financial crisis."

-- It's a great time for a war, because just like the 2nd quarter earnings season last year triggered all these defaults (exactly as I predicted last April), this earnings season should be twice as bad or worse as infinite growth drives towards... capitulation. And with another devastating round of economic collapse, which might well be worse than 2008, the downfall of the west will be pretty much apparent anyway.

But then China, and the rest will follow immediately. So... fuck it. Attack Iran. -- MCR

Market's Next Big Worry: A Dismal Earnings Season Ahead

CNBC,

19 March, 2012

After all, stocks have powered higher before without the benefit of strong earnings to back them up, and those betting on the market to keep roaring here are hoping the same thing happens this time.

But after a surge that has taken the S&P 500 up 28 percent in five months, a psychological nudge could be all the market needs to lose some shine.

"We built the earnings already. We did a good job of it — now it's more about getting paid for what we already built," Paulsen says. "If you're going to tell me earnings are going to collapse, that is a real concern. The markets will have a problem with that. If you're going to tell me that earnings are going to slow to 5 percent growth, I don't think that's an issue. In some sense, it's a natural progression."

Corporate America is coming off a quarter in which 63 percent of S&P 500 companies beat earnings estimates.

But those beats came on sharply lowered expectations, and the primary drivers for the aggregate beat were blowout earnings from Apple [AAPL  601.10    15.53  (+2.65%)   ] and Caterpillar [CAT  113.73    0.15  (+0.13%)   ]. Until those two bellwether companies reported, the beat rate was running closer to 55 percent.

Some are wondering whether the market can get away with an even worse performance this time around, particularly considering how far stocks have run.

"Traders are now really fearful that companies are not going to be able to hit their earnings targets next time around," says Todd Schoenberger, managing director at LandColt Trading in Lewes, Del. "That may be the catalyst to really get stocks trending lower, and it could very well stay that way the rest of the year."

S&P is expecting full-year earnings growth of 5 percent that would send the "500" to an aggregate of about $105 per share.

Consumer confidence is up and markets have been more positive due to economic strengthening in Europe and the U.S. Sharing perspectives on how to position your investments, with Stephen Bodurtha, Citi Private Bank head of investments for North America.

In this upcoming period — earnings season officially kicks off April 10 when Alcoa [AA  10.60    0.06  (+0.57%)   ] reports — the best sectors are expected to be industrials (10 percent growth) followed by information technology (4 percent) and consumer discretionary (3 percent). The weakest sectors likely will be materials (down 15.5 percent), telecom (minus-14 percent) and utilities (down 4 percent), according to Sam Stovall, S&P's chief equity strategist.

In all, six of the 10 S&P 500 sectors are likely to see earnings declines.

Companies themselves have been preparing investors for a letdown, with the level of negative preannouncements at their highest level since the March 2009 market lows.

And money continues to pour out of domestic stock-based mutual funds, with another $2.84 billion leaving last week, according to the Investment Company Institute.

"The bar is set pretty low. People aren't really expecting much," Stovall says. "We had a very nice run in the market. If there is to be a disappointment, now would be the time for it to occur."

Investors, then, may be gearing up for another round of sell-in-May-and-go-away, which was a highly successful strategy in 2011.

"Going forward, everyone wants to know where the earnings are coming from," Schoenberger says. "Realistically, you probably should lock in the gains while you gain."