Warning: Rough Earnings Ahead?

Companies are surprisingly quiet while analysts have begun slashing estimates aggressively heading into the end of the second quarter, a phenomenon that could mean we’re in for some surprises over the next week, and not the good kind either, investors said.

“The pre-announcements are coming and they are likely to be on the negative side,” said Patty Edwards, money manger for Storehouse Partners. “Companies have been quiet because there are so many moving parts right now with Euro exposure and the varying costs of raw materials.”

For companies in the S&P 500 this quarter, there have been about one negative preannouncement for every positive preannouncement, according to data from Strategas Research Partners. Typically, there are two negative warnings for every one as the companies with bad news try to brace their shareholders for the poor earnings report around the corner. CFOs may still just be trying to figure this out.

With a bare earnings and economic calendar next week, end-of-quarter announcements will be what moves the market into the quarter’s close. The S&P 500 pared its correction losses this week from its 2010 highs in April as investors’ concerns about a Europe-to-China-to-Globe economic slowdown eased.

In contrast to the stabilization this week however, a greater number of analysts are cutting estimates, than raising them, citing those economic concerns. “Over the last week, the net revisions ration for the S&P 500 and all 10 sectors has declined,” wrote Bespoke Investment Group analysts in their weekly revisions report.

Storehouse’s Edwards, also a ‘Fast Money’ trader, believes the industrials are the most vulnerable group because of their exposure to the Euro and China.

JPMorgan slashes its estimates on Rockwell Collins and Dow member, United Technologies, yesterday, citing slowing economic growth. Not a good situation for the market when company analysts are more negative than management.

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