Wall St. Faces Bleak Q4 Earnings

In the past month, fourth-quarter earnings expectations for companies in the S&P 500 have fallen by nearly half, according to Thomson Financial. So says the FT.

The problem has several sources and none of them is likely to go away soon. High oil prices are likely to hurt revenue at auto companies like GM (GM) and airlines. Companies like UPS (UPS) and Fedex (FDX) are also going to be set-back. And, with refinery margins low, high oil prices may not help Big Oil earnings much.

Housing and financial stocks are unlikely to recover from the mortgage crisis, at least this year. Large banks and investment houses face billion of dollars in write-downs in Q4 related to mortgage-backed fund pools.

Companies like GE (GE) and Deere (DE) might expect goods sales outside the US, but sales in this country are likely to drag total results down.

There is, of course, tech. Microsoft (MSFT) and Google (GOOG) may continue to do well, but Cisco (CSCO) indicated that its orders from financial clients were off. PC sales are robust now, so HP (HPQ) and Intel (INTC) may do well, for the time being.

All in all, perhaps a quarter of the major sectors of large companies have a chance at much better earnings. The leaves 75% in the "so so" to "really bad" columns.

Douglas A. McIntyre