(February 6 – 17:50 ET) – First Call analysts say that U.S. stocks are heading into a profits recession.

Although it can’t decide whether or not an economic recession is imminent, First Call says, “One thing that is clear is that we are heading into a profits recession for the Nasdaq 100, and there is a great possibility that the S&P 500 is heading there as well.”

First Call says that Nasdaq first quarter earnings are expected to shrink by 14.6%, slipping 15.9% in the second quarter, 13.3% in the third quarter, but turning around in the fourth quarter.

“While earnings are expected to grow 1.6% for 2001, the probability of ‘negative growth’ for the entire year is a viable risk,” says the firm.

“The fourth quarter forecast will be extremely important as easing monetary policy will have worked its way through the economy and we should start to feel the initial effects desired by the Fed.” First Call says the market may already be looking to 2002 for earnings growth.

After last week’s recessionary reading from the National Association of Purchasing Management, First Call’s growth figure for the S&P 500 moved into negative territory this week. “With Q1 earnings expected to decline 0.4% from the comparable period last year and expected growth for Q2 a weak 0.5%, a profits recession is likely.”

The firm concludes that although the short-term looks poor, markets have already priced this in for the most part. “There is much talk of an expected turn-around in the second half of the year, with an emphasis on the fourth quarter. If we dare to look out to 2002, we would mention that the year-over-year comparisons would resemble a turkey shoot in the early morning roost.”
-IE Staff