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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.

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