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Getting Ready for Small-Cap Earnings Season

Friday, 23 Jul 2010 | 11:25 AM ET

While there have been some eventful headlines such as Apple’s blowout quarter and Amazon.com’s big disaster, the large-cap earnings season has been rather uneventful. Analysts set the bar very low and companies have come in with slightly higher results, pushing the Standard & Poor's 500 Index up about a miniscule one percent since Alcoa kicked things off two weeks ago. Well now it’s going to get interesting.

More than 1,600 small caps are set to report over the next three weeks and unlike the S&P 500, these companies may struggle to hit their mark, according to Credit Suisse.

“There has been downward revision activity at the aggregate level recently and we expect limited positive surprises during the reporting season,” wrote Credit Suisse’s quantitative analyst in a report.

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More than a third of the S&P 500 has reported earnings, but many of the key bellwethers are out so investors may have seen all they need to see. The more volatile smaller companies are a bigger question mark. The Russell 2000 , the benchmark for smaller companies, enters its earnings season about even with the S&P 500. This is atypical.

Usually small caps react to current economic conditions in a more extreme way. If the domestic economy is hurting and banks are curbing lending, that could prove out Credit Suisse’s theory and send the group lower than the S&P 500. The group is playabale through the iShares Russell 2000 Index ETF .

Some of the more notable small caps out next week include Coinstar , the maker of the Redbox DVD rental kiosks, and Domino’s Pizza . These are pure bets on the American consumer.

For the best market insight, catch 'Fast Money' each night at 5pm ET, and the ‘Halftime Report’ each afternoon at 12:30 ET on CNBC.

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