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Lowered Expectations Sweeping Street

AmEx on Monday will tell us about how consumer spending looks, but the pattern is clear: CEOs are talking down expectations.

Sound familiar? They did this before! At the end of Q1, there were all sorts of comments from CEOs not to expect much in Q2 and Q3. And guess what? Earnings were better than expected, and stocks rose after the weakness in February and March (which was partly caused by concern about a global growth slowdown--remember that?)

My point is this: managing expectations downward is a very clever strategy. I'm not saying it's not real, but we may well see Q4 numbers get moved down, Q1 numbers get moved down, and then they all beat big time in Q1.

To summarize: it started with Citi on Monday, taking big charges on credit and mortgage concerns, and it ended with Caterpillar , which came out today and lowered expectations about growth in the u.s. economy. Caterpillar for example said that many industries that buy their machinery are already in a recession--like housing, commercial real estate, and some parts of the mining industry.

Caterpillar did emphasize that growth outside the united states is still robust, in fact 3Mand Honeywell also said the same thing , but the markets focused on the slowing U.S. economy, and the implication that earnings for the fourth quarter will probably have to come down.

Questions? Comments? tradertalk@cnbc.com

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