Bearish Sentiment Grows as Earnings Ramp Up

By Ariel Nelson
|  Monday, Jan 11, 2010  |  Updated 10:43 AM CDT
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As Earnings Season gets further underway, analysts continue to revise their estimates for the First Quarter downward.  Data from Thomson Reuters shows that year over year EPS growth numbers from last April are now expected to fall 37.8% compared to an expected drop of 12.5% at the start of the year.


Source: Thomson Reuters

David Rosenberg, North American Economist at Bank of America / Merrill Lynch (NYSE: BAC), is one analyst that seems to agree.  In one of his recent reports he states "We remain of the view that the risk of earnings disappointments will take the S&P 500 to new lows before the bear market runs its course. Based on the outlook for corporate profits and the typical trough P/E multiple that characterized recession bear markets, it would not surprise us to see the S&P 500 gravitate in a 475-650 range for an extended period of time."

According to Thomson Reuters, this is also the first time since they have been tracking sector earnings growth in 1998 that all 10 S&P 500 sectors are reporting contraction.  Consumer Discretionary is expected to have the worst quarter, down nearly 110% from one year ago while Health Care is expected to fall the least.


Source: Thomson Reuters

The next few weeks will tell if these bearish views hold true or more signs of a recovery emerge.  Look for reports from Johnson & Johnson (NYSE: JNJ), Goldman Sachs (NYSE: GS), and Intel (NASDAQ: INTC) tomorrow for any change in the environment.  Other major companies reporting this week include
- Wednesday:  Abbott Labs
- Thursday: JPMorgan Chase, Nokia, Southwest Airlines, Google
- Friday: Citigroup, General Electric

Comments?  Send them to bythenumbers@cnbc.com

bythenumbers.cnbc.com

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