It's early in the third-quarter earnings season, but two trends are emerging.
1) The consumer is holding up: Costco Wholesale beat, Yum Brands beat and raised guidance.
2) Slower global growth is causing customers to delay orders; this is particularly impacting technology and industrials.
Avnet is a good example of the problems faced by the tech hardware industry. They sell electronic components and computer parts (semiconductors), and also sell their own servers and data storage systems. This morning they pre-announced revenues that were 9 percent below last year's, and lowered earnings guidance.
While the CEO cited the now-familiar "uncertain macroeconomic conditions" there was also more specific commentary about what the problems are: 1) customers delaying new tech investments; 2) lower margins; and 3) regional weakness (60 percent of revenues are outside the U.S., with a quarter of sales in Europe).
We've seen comments about weaker demand from competitors in the semiconductors space like Intel and Texas Instruments, and other component makers like Jabil Circuit also said demand was weak; that has impacted other competitors like Arrow Electronics and Ingram Micro.
Weaker global economic growth is also a problem for the industrials. Diesel truck maker Cummins, like Avnet, noted that many customers were delaying capital expenditures.
Cummins lowered its full-year outlook, cut its 2012 revenue guidance by $1 billion to $17 billion, short of the Street’s $18.1 billion view. It also said it would slash up to 1,500 jobs.
Cummins, which generates nearly half of its revenue in the U.S., said it anticipates the most significant changes will be made in the North America heavy duty truck and international power generation markets. “Demand in China has weakened in most end markets and we have also lowered our forecast for global mining revenues,” said Cummins CEO Tom Linebarger.
1) Home Depot downgraded? Yep, at Oppenheimer, on price. Now, at first glance this looked like a very smart call. The stock is up over 100 percent since August of last year (really!). "Shares Due for a Breather," the note said. Right! Still bullish on housing ... in early stages of a prolonged recovery. Right! Shares likely to trade sideways as earnings catch up with a "now premium multiple." Good observation. But wait a minute: The target price was increased to $67 from $61. Huh? Well, it hit the price target. Closed at $60.95.
—By CNBC’s Bob Pisani; Follow Him on Twitter @BobPisani
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