Earnings reports and guidance from public companies will have to incorporate a hodgepodge of maladies affecting the economy such as the deepening financial crisis, banking sector, automobile industry, and unemployment, writes Scott Rothbort for The Street.
In this earnings season, investors should be aware of five things in particular:
The duality of job cuts. It is expected that more companies will cut jobs and this will make the companies leaner and more efficient, but the cuts will occur on the back of diminished demand and profitability.
Diminished returns to shareholders. Liquidity issues will hinder companies from issuing new stock repurchase authorizations and dividends in many companies are likely to be slashed. It is noted that either corporate dividends will fall or Treasury yields will climb.