Q4 Earnings Growth by Sector: Financials a Drag

With 98% of fourth quarter earnings reports now in, below we highlight some final growth numbers for the S&P 500 and its ten sectors. As shown below, the S&P 500 as a whole saw year over year earnings decline by 22.8%. But only three sectors actually saw year over year earnings decline -- Financials, Consumer Discretionary and Materials. Financials are the underlying cause of the large declines seen by the S&P 500. At -123%, earnings for Financials in Q4 were a complete and utter disaster. The question now is whether or not they will be any better in the first quarter of this year.

While three sectors saw declines, the other seven had relatively strong growth in the fourth quarter. Utilities, Technology, Energy and Telecom saw year over year earnings growth of 20% or more. And the S&P ex-Financials was up 15.7%.

But the argument that sectors with strong Q4 earnings should be doing better is not a valid one. As shown, many of the sectors that reported strong growth recently are down significantly year to date. Since stocks are a discounting mechanism, there's clearly a slowdown on the horizon.