Investors Look for Signs of Slowdown Amid Higher US Earnings

October 10 00:00 2011

New York, October 10 ( – A double-digit yearly growth in the third quarter reporting season starting this week is expected in US corporate profits. However, investors are looking for signs of a slowdown that could dampen optimism and remove support from US stock valuations.

Alcoa, the aluminum producer, is likely to show lower earnings than in the second quarter although they will be well above the third quarter of 2010. This year’s third quarter results will be published on Tuesday. Analysts at Deutsche Bank said that Alcoa’s profits declined because aluminum prices went down in the third quarter without a corresponding fall in costs.

Annual growth for banks is almost stagnant and the financial sector as a whole is also likely to be even weaker than other sectors. Analysts feel that lenders’ profits will grow just 2 percent over last year. On Thursday, the banks’ reporting season will begin with JPMorgan Chase. S&P said that analysts have modified estimates most sharply for investment banks mainly because of a decline in capital markets activity and increased volatility.

The slowing of the economy is evident from the poor macroeconomic data like job creation and as such analysts have been skeptical about US companies’ earnings growth. The forecasts for consensus US year-on-year GDP growth for the third quarter have dropped from 3.2 percent in July to 1.8 percent.