Of the 28 large companies reporting today, 9 missed on earnings while 14 missed on revenue. The trend continues: more are generally beating earnings estimates than the historical average (about 62 percent), while more are missing on revenues forecasts than the historic average.
For the third quarter (Q3), S&P Capital IQ now sees 4.1 percent growth in earnings and revenue growth of 3.9 percent. For Q4, an 8.4 percent increase in earnings, and 3.8 percent increase for revenue.
So far, 213 companies in the S&P 500 have reported (42 percent)....66 percent are beating earnings estimates, and 50 percent are beating on revenue. The average is 62 percent beating on earnings, 61 on revenue.
Bottom line: The habit of beating on the quarter and then lowering expectations for the next quarter has been going on for over two years now, and is continuing in this quarter as well.
What's doing well this quarter: autos. The sector is holding up well, as Ford beat and raised full year forecasts. AutoNation was also good, and aerospace and defense is doing very well (Raytheon did well and raised its guidance).
Airlines are also doing well, helped by higher prices, strong bookings and lower jet fuel prices. United Continental posted a rare miss, but that was an anomaly. Southwest Air CEO said, "third quarter economic fuel costs declined 5.7 percent year-over-year driven by lower prices per gallon and less fuel consumed per available seat mile. We currently expect another significant year-over-year decrease in our fourth quarter 2013 economic fuel costs."
Hotels, a similar business, are also performing well. Starwood beat on top and bottom line and raised its 2013 EPS...they noted that in North America, occupancies were at all-time highs, and REVPAR increased by 6.9 percent at company-operated hotels. The CEO said, "We remain bullish on the long-term trends of rising wealth and increasing demand for travel in fast growing economies, even in the face of slower growth in China, unrest in the Middle East, and economic challenges in Latin America."
What is not holding up as well are semiconductors: Guidance seems very poor for Q4. However, F5 Networks, big in file storage, had a great report.
Fair: big industrial names like 3M, which beat on the top and bottom line, and narrowed their full year forecast.
1) The quest for a banking union in Europe is losing steam, according to a front-page story in the Wall Street Journal today. One of the key components of the union would allow EU officials to decide when failing euro-zone banks should be shut down. Germany, however, has led a coalition against the idea, arguing it would give too much power to bureaucrats in Brussels. They add it would make it too easy for those bureaucrats to spend Germany's money to save banks in other countries.
This is a bad sign. We know that having a single currency among 17 countries that all have different fiscal policies is a bad idea. It doesn't work. Because markets are calm, there is little incentive for anyone to cooperate. We will have to wait until the next crisis for another chapter to unfold. Long term, the status-quo is not sustainable. Either in or out on union.
—By CNBC's Bob Pisani