Wall Street sanguine as it heads into worst earnings season in six years

Wed Apr 8, 2015 1:21am EDT
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By Caroline Valetkevitch

NEW YORK (Reuters) - Wall Street is greeting what is expected to be the worst earnings season since 2009 with a gigantic shrug.

Though there has been some selling in recent weeks, there's been no panic dumping of stocks, even though forecasts for S&P 500 first-quarter earnings have tumbled since Jan. 1, thanks to the surging dollar, falling oil prices and another severe winter. The earnings season unofficially kicks off Wednesday with results from aluminum company Alcoa (AA.N: Quote).

Among some key early results, JPMorgan Chase (JPM.N: Quote) is due to report next week along with other banks and General Electric (GE.N: Quote).

First-quarter S&P 500 earnings are projected to have declined by 2.8 percent from a year ago, which would make the quarter the worst for results since the third quarter of 2009, not long after the United States emerged from the Great Recession, according to Thomson Reuters data.

But investor sentiment has been boosted by optimism that the Federal Reserve will continue to delay its first interest rate hike in nearly a decade. The S&P 500 lost 1.7 percent in March but remains up 0.8 percent for the year so far.

"The market is holding up remarkably well... all in the face of earnings concerns and the fact that economic news is a little worse than expected," said Robert Pavlik, chief market strategist at Boston Private Wealth in New York. "It speaks to people's expectations that the Federal Reserve is going to remain on hold at least until September, maybe a little longer."

S&P 500 earnings typically beat lowered analysts' expectations, and strategists said the unusually large drop in first-quarter forecasts sets a low bar for companies to surpass.

Energy is expected to take the biggest hit this earnings period, although analysts have cut projections for every sector.   Continued...

Street signs for Wall St. and Broad St. hang at the corner outside the New York Stock Exchange March 24, 2015. REUTERS/Brendan McDermid