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Wall Street will quickly shift its focus to corporate earnings news once the books are closed on the third quarter this week.
Joe Quinlan, for one, thinks investors are in for some good news. "I'm encouraged that there's a skepticism about the earnings potential for third quarter. A lot of investors are underestimating how productive U.S. companies have become," said Quinlan, who is the chief market strategist at Bank of America Merrill Lynch. "I think final demand is picking up." Third quarter earnings for the S&P 500 companies are expected to be down 24.7 percent. Many analysts think the bar is higher than last quarter in terms of upside surprises. The quarter wraps up Wednesday, and the earrings reporting season starts with Dow component Alcoa on Oct. 7.Of the S&P 500 companies, 73 percent saw positive earnings surprises in the second quarter, and the street has been raising estimates ever since. Quinlan said he is in the process of ratcheting up his own estimates for the third quarter. He also expects to hear more encouraging comments on the outlook from corporate managements as they release earnings news.
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