THIS week marks the first big week of second-quarter earnings, and it is sure to bring both joy and misery to Wall Street.
Investors will concentrate on market fundamentals after weeks when Federal Reserve policies have dominated the market. If they see companies are still struggling, stocks could take a fall.
Even after Fed Chairman Ben Bernanke scared markets in June by telling investors the Fed is likely to reduce monetary stimulus in the coming months, stocks have recovered, with both the Dow and S&P 500 climbing to all-time highs.
Earnings are seen growing 2.8 per cent in the second quarter, according to Thomson Reuters data, but that is a far cry from the 8.4 per cent growth forecast by analysts on 1 January. Revenue is now seen increasing 1.5 per cent.
For every company that has said it expects positive earnings, 6.5 have lowered their forecasts, the worst positive-to-negative ratio since the first quarter of 2001.
In the coming week about 70 S&P 500 companies will report results.
General Electric, Verizon, Johnson & Johnson and UnitedHealth are among the biggest names, as are giant tech companies Microsoft, Intel, Google and IBM.
Financial companies may be the most in view as investors look to reports from Bank of America, Citigroup, Goldman Sachs and Morgan Stanley, among others.
The sector is seen posting profit growth of 19.6 per cent in the quarter, by far the highest among S&P groups.