Wall Street is bracing for a big round of second-quarter earnings reports. But few expect them to deliver good news for the state of Corporate America.
Earnings season begins a slow trickle next week that will intensify through the month as investors look for clues on the market's health. The mood is generally pessimistic, though market pros are unsure whether the news could get so bad that it will form a market bottom and generate a turnaround for the second half of the year.
"All of my expectations for everything are low, and really I'm looking at not necessarily what I'm buying on the stock market—I'm looking at what I'm shorting," says Matthew Tuttle, president of Tuttle Wealth Management. "I'm not in the second-half-we're-going-to-have-a-nice-recovery camp."
Some have speculated, in fact, that earnings could be so bad that they'll precipitate a market-bottoming, or capitulation, that would ultimately lead stocks back up again.
It's a theory, though, that is considered cautiously optimistic at best.
"I think panic-selling is much more likely than panic-buying, and we're short the US," Tuttle says. "I don't see changing that anytime soon."
July 7-10: Alcoa, GE Bookend the Season's Start
The first big company to report will be Dow component Alcoa,which checks in after the closing bell Monday, and the aluminum manufacturer is expected to see quarterly profit below last year. Analysts are looking for a 69 cents per share profit, against last year's 85 cents, according to analysts surveyed by Briefing.com.
Soleil Securities upgraded Alcoa to "hold" from "sell" on Friday, based primarily on the notion that the stock's 21 percent drop in 2008 made the price more attractive.
Alcoa's stock has bucked the trend of metal-oriented companies rising. The company has been hit by higher oil prices because of its energy-intensive operations. Also, the company once was seen as a target for takeover, but that talk has faded, again in part because of pressure from energy costs.
Wednesday's earnings feature hotelier Marriott and tech leader Texas Instruments, both of which probably will show lower profits than the year before. Marriott is likely to report a profit of 49 cents a share against 57 cents for the same quarter last year, while Texas Instruments probably will show 89 cents a share, off from last year's $1.09.
The week culminates with one of the market's earnings bellwethers, CNBC.com-parent General Electric, which stunned the market by badly missing its first-quarter numbers.
For the second quarter, GE is expected on Friday to post a profit of 54 cents per share, narrowly ahead of last year's 53 cents. Aerospace company Rockwell Collins also reports Friday, with analysts expecting the company to buck the trend of falling profits by reporting a $1.02 per share gain against last year's profit of 86 cents.
About the only thing that has investment advisers optimistic is the chance to swoop in and pick up some undervalued companies whose earnings send their stock prices down.
"The sensitivity to the earnings reports is going to be magnified because of everything else that is happening," says Randy Carver, president of the Carver Financial Services affiliate of Raymond James. "I do think the market is going to be more sensitive to individual companies and that's going to create some opportunities for people."
July 14-18: Dow Components, Financials
Things get busier during the second full week of the month.
July 10 features M&T Bank reporting before the bell and pharmaceutical leader Genentech after the bell. M&T is seen posting a $1.58 profit against last year's $1.95, while Genentech is expected to see an 85 cent-profit against 2007's 72 cents.
The rest of the week's numbers, with expected profit first, followed by last year's number in parentheses:
On Tuesday of that week, the market will hear from consumer staple company Johnson & Johnson, $1.12 ($1.05) and financials State Street, $1.35 ($1.07) and US Bancorp, $0.60 ($0.65), all before the bell. After the bell will feature Nasdaq leader Intel $0.26 ($0.20), which should provide direction for technology heading into the third quarter.
On Wednesday, Delta Air Lines, $0.09 ($0.70),will provide a picture of what's happening in the battered airline industry, while private equity leader BlackRock, $2.03 ($1.80), also reports and bank Wells Fargo, $0.51 ($0.67) looks to reverse its steep declines. Fast-food leader Yum! Brands, $0.42 ($0.39), reports after the closing bell.
Merrill Lynch could post its second consecutive quarterly loss Thursday, with analysts anticipating the Wall Street titan to show a $1.22 loss against a profit of $2.24 for the same period in 2007.
Some of the biggest names on the Dow report the same day, led by Coca-Cola, $0.96 ($0.85); JPMorgan Chase, $0.52 ($1.20); International Business Machines, $1.81 ($1.50)and Microsoft, $0.47 ($0.39).
Google also will be watched closely, with the search engine leader expected to report a profit of $4.72 a share, soaring far above last year's $2.93. Ford reports as well, and probably will post a loss of 25 cents a share, against a 13-cent profit from a year ago.
Financials close the week out on Friday, with Citigroup, -$0.57 ($1,24), also likely to post its second consecutive quarterly loss. Global energy firm Schlumberger $1.12 ($1.02) and manufacturer Honeywell $0.94 ($0.78) also report.
When the earnings finally wash out completely, analysts say, there probably won't be any major surprises to either side.
"I don't think you're going to see a big turnaround until after the election, because so many people are going to be looking for things to worry about," Carver says. "Oil prices will fall back later this year, so I think that's going to be a bigger factor psychologically and physically."