Hope dies hard. A lot of Wall St. analysts still think that earnings from the S&P 500 companies will be up in aggregate in Q4 2008 compared with the same quarter last year.

There is an extremely good chance that the projection will be wrong.

To a large extent, the earnings math will depend on financial companies because they have such a significant part of the pie. If the government bailout works and Paulson buys assets at a full price, banks may get a reprieve. However, they may be faced with other consumer write-offs and falling underwriting, M&A, and LBO revenue. Some LBO loans may still have to be accounted for and that is not likely to help.

The S&P 500 has a fairly heavy weighting of tech companies, lead by firms such as Microsoft (MSFT) and Google (GOOG). Just yesterday, Steve Ballmer said the world’s financial crisis could hurt nearly every industry. Without being direct about it, he was almost certainly referring to his own.

The index also has a heavy representation of industrial and energy firms such as GM (GM) and Exxon Mobil (XOM). These companies are likely to underperform compared with a year ago.

The swing corporations will be consumer goods and services. That means that firms including McDonald’s (MCD) and Procter & Gamble (PG) will need outsized results to bear up the average pulled down by companies in industries which remain deeply troubled.

That is a lot to ask.

Douglas A. McIntyre

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