“People should forget the Fiscal Cliff, this market is all about the Earnings cliff,” said hedge fund consultant Michael Belkin, The Big Picture blog reports.
S&P estimates earnings of S&P 500 companies fell 3% in the third quarter from a year ago. That would be the first drop in corporate profits since the end of the recession, according to Fortune.
In a note earlier this week, S&P said of the 188 companies that reported third-quarter earnings, 113 beat estimates, while 45 missed, producing a beat rate of 60%, down slightly from the second quarter.
“And yet about 60% have missed their sales targets, meaning that corporate America is somehow extracting more profit than promised despite bringing less money into the tills than expected,” Reuters reports. “Corporate earnings and revenues can’t, as they are doing this earnings season, diverge forever.”
Full disclosure: Tom Lydon’s clients own SPY.