Earnings Season Kicks Off with Disappointing Outlooks

Joel Anderson  |

It's earnings season again and companies are lining up to begin reporting earnings from the first quarter of 2012. The markets, on the whole, have been pumping out consistent gains in terms of share price as the major indices responded well to Europe appearing to stabilize and relatively strong economic data continuing to flow out.

However, things appear to have taken a stumble in the last week or so. Since peaking on March 26, the markets have been in a mini slump and Friday's disappointing job report combined with troubling Spanish bond auctions have some worried about another downturn. If ever there was a time when a series of bullish earnings reports would be greatly appreciated, now would be that time.

Unfortunately, projections for the earnings reports for the first three months of 2012 don't appear to be on pace for the sort of rebound that many would hope for. Thomas Reuters: "the earnings growth rate for the S&P 500 for Q1 2012 is 3.2%. Excluding Apple (AAPL), the overall growth rate declines to 1.8%. The Industrials (10.6%) and Consumer Discretionary (6.6%) sectors have the highest growth rates for the quarter, while Materials (-14.7%) has the weakest growth rate."

While the markets as a whole don't appear to have the mojo in their earnings to support further rallies in the coming months, Apple may be poised to knock another earnings statement out of the park. The company launched itself into the stratosphere in January after its last earnings report, and with the release of the new iPad coming since then, there's a real chance that Apple is going to crush expectations once again. Already the most valuable company in the world, look for Apple to pad its lead over Exxon Mobil (XOM) if this turns out to be the case. Apple, though, won't be reporting until April 24th, and until then the business world waits with baited breath.

This next week holds reports from Alcoa (AA) on Tuesday and Google (GOOG) on Thursday afternoon. On the whole, people are watching closely to see if analysts predictions that this will be the slowest quarter for growth in over three years will come true. Alcoa has long been viewed as a classic bellwether for the economy, and Google's earning could give a real insight into the tech sector's future.

"It seems like we're hitting resistance," said Jack Ablin, chief investment officer of Harris Private Bank in Chicago. "I think the market will grind higher, but it will be at a much slower pace. Earnings and jobs aren't helping."

One sector that appears capable of bucking the downward trend is financials. Banks have been coming back in a big way after suffering through the financial crisis five years ago and then taking a major hit in the second half of last year while markets panicked over the European debt crisis. Since? Bank of America (BAC) has managed to double its share price since December 20th, and many believe that major banks are capable of continuing their strong run. Look out for earnings reports from JP Morgan (JPM) and Wells Fargo (WFC) on Friday morning to kick things off for the sector.

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