NEW YORK (MarketWatch) -- With a third straight week of losses for the Standard & Poor's 500 Index, the backdrop to the dismal run can be seen in earnings reports already in from more than a quarter of the companies listed on the index.
Despite an intraday turnaround Friday, the S&P 500 is poised for a record-breaking sixth consecutive quarter of negative growth.
"Expect charges to continue for [the fourth quarter], as companies clean house for a better 2009. Provisions for layoffs should increase, with the actual cash flow charge taking effect in 2009," said Howard Silverblatt, senior index analyst, Standard & Poor's.
On Friday, quarterly reports including results from bellwether General Electric Co. weighed on equities, with a rally in energy shares and hopes for more government help for banks offsetting the declines. The Dow Jones Industrial Average fell 45.24 points, or 0.6%, to 8,077.56, off 2.5% for the week. The S&P 500 gained 4.45 points, or 0.5%, to 831.95, posting a weekly drop of 2.1%. The Nasdaq Composite added 11.8 points, or 0.8%, to 1,477.29, down 3.4% from the prior Friday's finish.
As of the close of business on Thursday, 93 of the S&P issues had reported negative aggregated results of minus $1.16 operating and down $1.18 as reported, according to S&P. Sales were down 10.7%, with 44% of the 93 companies reporting higher year-to-year quarterly sales -- with an average of nearly 6% -- and 56% reporting lower sales, with the average down 21.5%.
The financial sector of the S&P is readying for its fifth consecutive quarter of negative earnings-per-share, down 97 billion versus the prior five quarters which had EPS up 263 billion.
"Before the credit crisis, financials contributed 34% of the dividend income [on the S&P,] but now they are under 20%. Then there is consumer discretionary, which did not have a Merry Christmas, and may not have a happy January," said Silverblatt.
The S&P is set for a sixth consecutive quarter of negative growth, topping the five consecutive quarterly declines that took place in late 2000 into 2001, and also a five-quarter stretch of declines that began in late 1990.
"We all know earnings were dire in the fourth quarter, we'd like to know what companies expect for the second and the rest of the year," said Marc Pado, U.S. market strategist at Cantor Fitzgerald.
Regardless, the earnings season will be nearly over by the end of February, with clarity also expected within that timeframe about the Obama administration's economic stimulus plan, an uncertainty that has also weighed on stocks.
"The White House is using the bully pulpit again to lobby on the importance of a quick passage of fiscal stimulus, reportedly by mid-February, without which it says that unemployment would rise into the double-digits," said analysts at Action Economics.
By Kate Gibson