1) earnings misses from Yum! Brands and Costco (where September comparable store sales were also light).
2) While both Wells Fargo and JPMorgan beat on earnings, revenues were light. The beat in WFC's earnings was largely due to reserve releases, and revenue declines from mortgages were larger than expected.
3) Guidance was disappointing from Union Pacific, Citrix, Yum, Chevron, and today from Allegheny Technologies. So far, only Micronhas offered an optimistic near-term outlook.
4) We also had disappointing back to school September same store sales from Gap , Buckle and L Brands.
But it's early. Here's what we can expect if the historic pattern holds:
1) earnings for the companies in the S&P 500 will again hit an historic record in Q3, which started out high at 6 percent on July, have now come down to 2.9 percent, according to S&P Capital IQ. If the standard pattern holds, we will end up beating the estimate by 2 to 3 percentage points--so we will have 5 percent or so earnings growth year over year.
2) guidance for Q4 is characteristically high, at roughly 9.8 percent, but that will start coming down quickly.
The pattern that materializes is this: Companies report low earnings growth (roughly 1 percent quarter over quarter), and low sales growth. However, it is still growth.
The wildcard for Q4 is Washington. There is concern--which I think is legitimate--that companies will use the deadlock in Washington to lower estimates even more than usual. In the worst case scenario, we could end up with flat growth in Q4.
THAT would not go over well. That's why this week is crunch time. It's not two weeks into this; the shutdown will drag on growth if it goes on much longer.