The reporting season for the first quarter’s earnings started on Tuesday with Alcoa kicking off the season with a loss of $497 million.
For some perspective on the current earnings environment, Chart of the Day provided a graph that compares the performance of S&P 500 earnings during the current economic recession (red line) with that of the last recession (gold line) and the average recession from 1936-2006 (blue line). As the chart illustrates, the current decline in earnings is significantly worse than the average decline during a recession. “The current decline is also more severe than the most severe earnings decline on record – the decline that began in 2001 (gold line),” said Chart of the Day.
Source: Chart of the Day, April 9, 2008.
Worse-than-feared earnings reports and guidance are key to the near-term outlook for the stock market. We’ll be paying close attention to the degree of ugliness.
