The Third Depression







I’ve discussed the potential for the coming 2Q earnings
season to disappoint as a primary reason for the recent weakness we’ve seen
in the stock market. The Wall Street Journal reported yesterday that
analysts have indeed been ratcheting down their earnings estimates for the
Second Quarter. Six of the top 10 sectors of the S&P 500 have had
earnings estimates lowered.

Basic materials companies have been hardest hit, with
current estimates now 13 percentage points below estimates from the
beginning of the month. Financial companies have seen the second biggest
fall in estimates, down more than 5 percentage points.

Overall, the companies of the S&P 500 are expected
to report $19.65 in per share earnings. S&P 500 earnings are expected
to peak in 4Q at $22 a share. Interestingly, 4Q estimates have not been
revised lower.