US companies are sounding the alarm on fourth-quarter earnings, lowering profit estimates just as the stock market is poised to end its best year since 1998.
The ratio of profit warnings to positive outlooks for the current quarter is shaping up to be the worst since at least 1996, based on Thomson Reuters data.
More warnings may jolt the market this week, but market watchers say this trend could be no more than analysts being too optimistic and needing to adjust downward.
Stocks rallied on Friday after a stronger-than-expected US payrolls report and ended flat on the week after eight straight weeks of gains.
As the quarter heads to a close, economic data, including the upbeat November payrolls report, suggest the recovery is building momentum, so much so that some investors worry the Federal Reserve may begin curbing its stimulus sooner rather than later.
Estimates for fourth-quarter S&P 500 earnings have fallen sharply since the start of the year when analysts were building in much stronger profit gains for the second half of the year. Steep holiday discounts are expected to result in thinner profit margins for some retailers in the fourth quarter.
Signs of a disappointing start to the holiday shopping period dragged on consumer discretionary shares last week. The sector declined 0.7 per cent.
The weakness gives investors more reason to focus on November retail sales data, which is due on Thursday and is likely to be the key report of the week.