Don't look now, but investors contending with a tug-of-war in Washington will have to deal with the start of earnings season this coming week.

And by all accounts - the numbers are not expected to look good.

The S&P 500 is expected to post earnings growth of 4-1/2 percent, a forecast which has steadily come down, and would be the slowest growth rate in a year, according to Thomson Reuters I/B/E/S.

JPMorgan Chase and Wells Fargo kick off the reporting season for the big banks. As a whole, the financials are not expected to have a bright quarter.

Paul Miller covers the industry for FBR Capital Markets.

SOUNDBITE: PAUL MILLER, BANK ANALYST, FBR CAPITAL MARKETS (ENGLISH) SAYING:

"They had some tail winds in the quarter with higher rates and the adjustment period it takes, especially with the mortgage banks, and the trading for the big broker dealers -just was not there in the quarter. So I think the banks have done a great job lowering expectations."

And while expectations for bank earnings may be running low, hopes for an end to the crisis in Washington are still running relatively high. Investors still think politicians are not crazy enough to let the October 17th deadline on America's $16.7 trillion debt limit run out and once again cause America to become the epicenter of a global crisis.

SOUNDBITE: PAUL MILLER, BANK ANALYST, FBR CAPITAL MARKETS (ENGLISH) SAYING:

"It's all about faith now. Right now I think there is a consensus that the government will come to some consensus and come to an agreement and get this done. The further we go into this and the more people feel like this is not going to happen then you see that disruption."

A disruption, analysts say, the economy can hardly bear. Third quarter earnings are already expected to show a consumer spooked by higher interest rates - look to results from Costco and Yum brands for that; a housing sector cooled by a spike in lending costs, which could be made worse by a drying up of funds due to the government shutdown; and corporate leaders who would rather spend lightly and hire sparingly until Washington gets its act together.

 

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