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Week of July 12 Earnings Overview

07/12/2010

Here we go - another round of earnings is upon us.

For this reporting period, I am focused on what corporations will tell us, what guidance they will give. We can certainly expect sales growth to slow as the consumer is challenged domestically by stagnant jobs and housing. Internationally, sales growth is challenged by the fallout from the euro zone and negative currency impacts. The question becomes by how much corporations expect sales to pull back.

Toward the end of 2009 I suggested that the arrival of "Earnings Exuberance Exhaustion" was near. Clearly, the January and April reporting seasons and the subsequent market responses confirmed the "EEE" effect in those quarters. I expect this earnings season to be highlighted by "resetting the bar" - lowering expectations going forward. Much needed, I might add, given the sluggish global GDP forecasts.

S&P 500 Index During January 2010 Earnings Season

Source: Bloomberg

S&P 500 Index During April 2010 Earnings Season

Source: Bloomberg

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