With the market falling with such ferocity in June, observers have been expecting Wall Street analysts to “blink” at any moment, taking out a hack saw to earnings estimates, bringing them into line with what the market is “pricing in.”
Alas, it hasn’t exactly happened that way. According to Barron’s 46.7% of earnings revisions in June were to the upside — below average — but not indicative of widespread bloodshed.
The window isn’t over yet. We still have one more week of pre-earnings calm, and we may yet see some last minute adjustments.
Nominal earnings aside, expect investors to obsess over any language on company earnings releases and calls that hint at a real-world slowdown.
Mike O’Rourke at BTIG observers:
The kick off of earnings season next week will be key. The Street widely believes the $95 estimate for 2011 S&P 500 earnings is too high and will be coming down as companies start providing guidance for how next year is starting to shape up. One would think the 17% correction has priced much of this in, but the market reaction to earnings will be key. The key question investors will be asking companies is whether or not their businesses are seeing the slowdown the stock market has been pricing in.
We continue to believe the next major upward move in Equities will be accompanied by improvements in jobs data, which has not materialised. That being said, the S&P 500 is setting up an important intermediate bottom sometime over the next two weeks. The 1000 level that the S&P 500 is testing is as important a technical level that this market has, and even if it is broken, it will likely only be for a short time frame. Sentiment has again shifted towards pessimism. The AAII % Bullish has dropped to 37%, into the buy threshold range below 40%. Looking only at the number of AAII Bulls, the latest reading is 24. The only lower reading since the first week of March of 2009 was the first week of November 2009. Throughout most of February 2009, the readings were this low, which indicates we are near a low, but the timing is hard to pinpoint.
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