Corporate America is about to get its report card for the fourth quarter, but with energy prices plunging and the U.S. dollar soaring, investors aren't quite sure what to expect.
What investors know is that the consequences of those moves will be felt, in some way, by American companies. What's unclear are their precise business impacts.
Many companies exposed to oil and the dollar use complex maneuvers to hedge their exposure to market moves, so the extent to which their overall results were impacted remains unknown. Meanwhile, it remains to be seen by how much low gas prices have boosted retail spending—and how drastically oil companies are cutting back on their equipment purchases.
With so much up in the air, investors are taking a cautious tone.
"It's always hard to predict what earnings are going to look like, but this quarter it's particularly challenging," said David Smith, chief investment manager at Bright Rock Capital Management, where he manages $2.5 billion.
"I think is highly likely that we see more earnings misses than in recent quarters, but we'll also get bigger upside beats," he added.
The first big week of fourth-quarter results is ahead, and it will dominated by the financials, with JPMorgan, Wells Fargo, Bank of America, Citigroup, and Goldman Sachs reporting results. Other widely watched names include Alcoa, which is reporting on Monday, and Intel, which releases earnings on Thursday.
One question is whether American companies will see overseas sales slide due to the impact of the rising dollar, which makes it relatively more expensive for foreign consumers to be American products.
The most pressing mystery, though, surrounds the retail stocks, which are reporting later in the earnings season.
"The consumer is the big question mark," said Kim Forrest, senior equity analyst at Pittsburgh based Fort Pill Capital Group. "Lower gas prices essentially give people a raise. But I don't know if those extra $50 bucks are going to make you go out and buy a $300 sweater."
President Obama, for one, hopes that low gas prices will spur a bit of spending.
While reminding his audience at Pellissippi State Community College in Tennessee on Friday that gas prices "go up, and they come down, and then they go up," he recommended that Americans "take the money you're saving, pay off the credit card or get a new appliance—or buy a fuel-efficient car, so that when prices go back up, you're still well positioned."
Of course, whether American actually do that remains an open question. And investors will be watching closely for any hints.