Excerpt from our One Page Annotated Wall Street Journal Summary (receive it by email every morning by signing up here):
AHEAD OF THE TAPE: Warnings Worrywarts
Summary: The market is now in mid-"pre-announcement" period, with earnings warnings from Lucent, Wiliams-Sonoma, AMD and 3M. But soon the regular earnings seasons will get going, in which companies usually best analyst estimates. S&P estimates current estimates for Q2 earnings growth at 9.4% and expects the real number to be closer to 11.5%. Most companies are not seeing evidence that the economy is slowing, so the market may do well as companies report their Q2 results, before being hit by new worries in the fall.
Comment on related stocks/ETFs: Chad Brand disagrees, and says you need to be careful here. The problem with the argument that things look worst at the time in the quarter when companies are issuing warnings is that it should hold true every quarter, in which case the market should always rise when earnings season proper gets underway. But that isn't the case. The key issue is therefore what proportion of companies have issued warnings. Ticker Sense, meanwhile, takes a look at the stock market impact of last earnings season.