Two-Way Street

Earnings Season: Shall We Dance?


There is a bit of a dance that goes on into the early days of earnings season. This year the dance more tense than usual.

Image Source | Getty Images

That’s because earnings season is seen as the economic-driver of last resort these days. Housing isn’t bouncing back. The jobs picture is still pretty bleak. And the consumer remains fickle. Throw in Europe’s debt problems and ongoing oil worries and, well, you just want to crawl under a bed and suck your thumb. What else is there to do but to hope for a robust set of quarterly profits from the business world?

Except Corporate America has been talking expectations down. About three times as many companies in the S&P have warned about earnings misses versus gains.

By the way…that’s the first dance step. And like a good partner, Wall Street is following the dancer’s lead. Analysts are guessing the average return for the S&P will be around 7 percent, versus nearly 20 percent in prior quarters.

The wallflowers…that’d be us in the business news media…have been watching the moves and trying to prognosticate the outcome. We have a couple of good takes on the Web site from Fast Money’s John Melloy, who notes expectations are so low that they can only go up, and Jeff Cox, who points out some positive surprise tonic may be just what the market needs.

Indeed this may be the case. Few of the “big boys” of the S&P have come out with warnings. Some bearish market mavens are showing some bull streaks. And the highly regarded JP Morgan Bank chief Jamie Dimon recently waved the bull cape too. So maybe, like a slick dancer, Corporate America is just “dipping” Wall Street before it raises the dance partner up for a twirl, eliciting ohs and ahs from us wallflowers.

Or maybe things are just going to be bad. Alcoa, the earnings season kick-off, did lose money despite getting a little stock pop for meeting expectations. We might end up under the bed sucking our thumbs after all.