Q2 earnings season: Blame Europe!

Europe has become the perfect scapegoat for anything market or economic-related. Stocks hit a spring speed bump, blame Europe; job growth tapered off in the second quarter, blame Europe; global growth easing, blame Europe; corporate earnings slowing, blame Europe!

When the final reading of GDP was released, it showed the first quarterly drop in corporate profits from non-U.S. business ($48.1 billion, to be exact) since the fourth quarter of 2008. Earnings from domestic business were up $41.7 billion. Same story about Q1: profits in the U.S. were up 10 percent from the year before, but earnings derived the rest of the world fell 12 percent, dragging down the overall results.

As earnings season kicks-off this week, analysts are preparing for the worst. According to Thomson Reuters, S&P 500 earnings growth is estimated to be up 5.8 percent from a year ago. But when Apple and Bank of America are removed from the data, (Apple due to amazing performance, B of A due to one-off, bad year-ago quarter comparison), earnings growth is likely to DROP by 0.4 percent. Analysts surveyed by S&P Capital IQ see an even larger 1 percent year over year decline.

Sure, Europe has something to do with the downshift in earnings -- about 14 percent of all S&P 500 company sales come from Europe alone, according to S&P data. And the problems in Europe have spread across the globe, where economies from China to Brazil to the U.S., have all slowed accordingly. Another equally important issue is that corporate America can no longer cut its way to profitability, nor can workers be more productive to improve the bottom line. As a result, profit growth has slowed and profit margins are under pressure.

Who can rescue us from these hum-drum results? Perhaps our Federal Reserve will swoop in and make it all (temporarily) better. The U.S. central bank would not be alone: Last week, the Bank of England, the European Central Bank and the Chinese Central Bank all announced measures to stimulate economic growth. When the Fed minutes from the last FOMC are released this week, we may glean more clues about how long the central bank will wait before pulling the trigger on QE3.

The next FOMC meeting is scheduled for July 31 and August 1. Has the data deteriorated enough yet? We just wrapped up the worst quarter for jobs growth since Q3 2010 (for more on the jobs report, see "Jobs Report: Tepid number reflects weak growth"); manufacturing has slowed; retail spending on anything but cars is weak and confidence is in the dumps.

For those who worked the 4th of July week, it felt like two different weeks: the first saw mild stock market gains, the second reversed course and snatched them away.

-- DJIA: 12,777, down 0.8% on week, up 4.5% on year

-- S&P 500: 1354, down 0.5% on week, up 7.7% on year

-- NASDAQ: 2937, up 0.08% on week, up 12.7% on year

-- August Crude Oil: $84.45, down 0.6% on week

-- August Gold: $1604.20, down 1.5% on week

-- AAA National Average Price for Gallon of Regular Gas: $3.38

THE WEEK AHEAD:

Mon 7/9:

Alcoa

Euro-zone finance ministers meet to implement summit agreements, which include: how to use the European Stability Mechanism; how to form the ECB-led single banking regulator; and of course, how to deal with Greece

3:00 Consumer Credit

Tues 7/10:

Weds 7/11:

8:30 International Trade

2:00 FOMC Minutes

Thurs 7/12:

7:00 MBA mortgage purchase applications index

8:30 Weekly jobless claims

2:00 Treasury Budget

Fri 7/13:

JP Morgan Chase, Wells Fargo

8:30 Producer Price Index

9:55 Consumer Sentiment

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    Jill Schlesinger, CFP®, is the Emmy-nominated, Business Analyst for CBS News. She covers the economy, markets, investing and anything else with a dollar sign on TV, radio (including her nationally syndicated radio show), the web and her blog, "Jill on Money." Prior to her second career at CBS, Jill spent 14 years as the co-owner and Chief Investment Officer for an independent investment advisory firm. She began her career as a self-employed options trader on the Commodities Exchange of New York, following her graduation from Brown University.