Earnings Season a Welcome Distraction from EU Drama (SPY)

July 10, 2012 8:37 AM EDT
Yesterday aluminum company, Alcoa, Inc. (NYSE: AA) reported earnings essentially in-line with estimates. More importantly, Alcoa earnings mark an opening salvo in what is being held up by some as one of the most important earning seasons in years. All in all, AA results were not bad and SPDR S&P 500 (NYSE: SPY) is higher by 0.43 in early trading on Tuesday.

For nearly three years, corporate profits in the U.S. have risen, and in a world of ever increasing macro headwinds, earning have been a shot in the arm to investor confidence. That may not be the case this time.

On the whole, analysts are expecting company earnings on the S&P 500 to decline by 1 percent in the second quarter on a year-over-year basis, according to S&P Capital IQ. So far, 26 companies have raised their earnings estimates compared to 94 companies that have warned of weaker earnings. And analysts have been steadily slashing earnings estimates throughout the quarter. The question is, are they low enough?

If not, it will undoubtedly be a rough summer for SPDR S&P 500 (NYSE: SPY). If earnings surprise to the upside, investors still have to grapple with slowing growth in economies in Europe and China, and a so-called jobless recovery in the U.S. Needless to say, investors are feeling a little jittery going into the summer earnings season, but it could be much worse. Investors in the U.S. could be waiting around for the results from another election in Greece... or for a root canal or two.

For a list of company earnings, visit EPS Insider at Streetinsider.com.

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