Why the Street's gloomy earnings outlook is a good thing

Traders work on the floor of the New York Stock Exchange.
Lucas Jackson | Reuters
Traders work on the floor of the New York Stock Exchange.

Wall Street analysts slashed estimates into the fourth quarter earnings season, but one research firm says this negativity is actually a bullish sign for the market, as well as for the individual stocks with the most negative sentiment.

"Looking at sentiment heading into earnings season, analysts continue to aggressively cut estimates on the companies they cover, and this has been a trend in place for more than a year and a half now," Bespoke Investment Group said in a note to clients Tuesday.

The firm added, "more often than not, when the expectations bar is set low for earnings season, the S&P 500 sees a positive performance during earnings season. Conversely, when the bar is set high heading into earnings season, the market has struggled during the reporting period."

Here are the sectors seeing the biggest cuts in earnings estimates by Wall Street and the stocks' chances for a rebound.

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