Where Are We in the Earnings Cycle?

Caterpillar CEO Doug Oberhelman on CNBC this morning: "There are lots of things that are unknown."

Where Are We in the Earnings Cycle?
Seth Perlman | AP

That's putting it mildly. Take a simple question: Where are we in the earnings cycle? Is this a trough, or not? If you can answer that, you'll have a good read on where stocks should go.

Right now, third-quarter earnings are flat. About one-fourth of the S&P 500 index has reported as of this morning (122 companies), earnings growth is FLAT (year-over-year), and revenues are up only 0.34 percent, according to S&P Capital IQ. (Read More: See CNBC.com's Complete Earnings Coverage.)

Oberhelman said, "We may have more clarity in the next few months," highlighting uncertainty about the election and the "fiscal cliff."

Caterpillar highlights the problems in the global economy: Order growth is slowing.

Two weeks ago, at the start of earnings season, I noted two trends:

1) The consumer is holding up; and 2) slower global growth is causing customers to delay orders.

We have seen that delay in orders show up with Caterpillar today. The company noted that while sales were up this quarter, new orders declined significantly: "Slow global growth and commodity prices that are off their 2012 highs have resulted in some reductions, delays and cancellation of orders for mining products," Oberhelman said.

A trough for Caterpillar? The jury is still out. He added: "China seems to be on the edge of some kind of recovery, but we haven't really seen it yet." Oberhelman is expecting that 2013 sales "will be similar overall to 2012, but with a slightly weaker first half and a slightly better second half."

Housing: Modest improvement continues. Caterpillar is projecting 2013 housing starts at 950,000 units ... an improvement over 2012 (872,000 was the number for September), but still far below the 2 million-plus from 2003 to 2006.

Elsewhere, the "Are we at a bottom?" debate continues with two big commodity companies reporting this morning.

1) Is coal bottoming? According to JPMorgan, coking coal (for steel) is about 10 percent off its lows, but iron ore prices are up 33 percent from their lows. Coal producer Peabody Energy handily beat estimates ($0.51 vs. $0.33 estimates) revenues were stronger than expected, and gave upbeat guidance for the rest of 2012. Buried in the report for Peabody Energy was these comments: "While the global coal environment remains challenged, there are indications that markets are stabilizing through U.S. gas-to-coal switching, higher European coal-fueled generation and increased China infrastructure spending."

Coal stocks are off their lows since U.S. presidential candidate Mitt Romney said, "I like coal," a few weeks ago, but don't kid yourself: there are not a lot of long positions in coal. Not yet.

2) Gold and copper producer Freeport McMoran handily beat estimates, noting: "Our third quarter results reflect production growth in North America and Africa, offset by anticipated lower ore grades in Indonesia."

3) Speaking of a bottom: Imagine how painful it is to sell commodity assets now. Imagine how painful this is for ArcelorMittal, the world's largest steel producer. It is looking to sell a large minority stake in their Canadian iron ore business for about $8 billion. They have to sell to avoid having their debt downgraded to junk. The steel market has been lackluster, with iron ore prices all over the place ($85 to $150 a ton, according to Dow Jones Newswires), but now off the bottom. That makes it hard to value what an iron ore business is worth. But they have to do it.

4) Greek stocks are at their highest level in almost 13 months, as the market has come to believe the European Central Bank is increasingly likely to buy Greek (and Spanish) bonds.

—By CNBC's Bob Pisani; Follow Him on Twitter @BobPisani

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