Wall Street braces for profit reports

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Wall Street may be bracing for a pullback as U.S. earnings season begins this week -- if the clouds of profit warnings from bellwethers ranging from FedEx to Hewlett-Packard lead to a downpour of lower profits.

The earnings season will kick off Tuesday with results from Alcoa after the bell.

Market strategists and investors say U.S. stock valuations are broadly out of sync with earnings estimates. They forecast a pullback in stocks in the coming weeks as more companies report results and reduce expectations for the fourth quarter and beyond.

Fourth-quarter estimates for S&P 500 companies show a 9.5 percent gain in profit from a year ago, according to Thomson Reuters data. Analysts say that outlook is too high, given what investors are already hearing from the corporate world.

"Earnings will be the telltale sign," said Alan Lancz, president of Alan B. Lancz & Associates Inc., an investment advisory firm in Toledo, Ohio.

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Nearly half of S&P 500 companies guiding lower for third-quarter earnings blamed weakness in Europe, according to a Thomson Reuters survey.

Another 11 percent blamed the weak global economy, 8 percent cited strength in the U.S. dollar, and 6 percent cited the slowdown in China, the survey showed.

-- Reuters

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