Ask Matt: What’s key about earnings season?

Q: What’s so big about this earnings season?

A: Fourth-quarter profit reports are expected to pick up in the next few weeks. Investors have written off the quarter - but the future is what’s most important

Just 73 companies in the Standard & Poor’s 500 have reported fourth-quarter results so far. Investors are bracing for what could be the second quarterly decline in profit in a row, according to S&P Capital IQ. Analysts think S&P 500 companies will report quarterly results that are 5.8% lower than in the same period a year ago.

Given expectations for the quarter are so low, investors must hear what company management says about upcoming quarters. Companies aren’t required to give investors so-called such earnings guidance, but about 40% of companies do, according to a report by a team of researchers at S&P Capital IQ including Li Ma. Stocks jump 3.1% on average in the three days after positive preannouncements and fall 4.2% on average after negatives ones. Positive guidance also tends to give stocks a lift in the following one to three month periods. Analysts are prepared for another decline in profit in the first quarter. But they want to see growth in the second quarter.

Paste BN markets reporter Matt Krantz answers a different reader question every weekday. To submit a question, e-mail Matt at mkrantz@usatoday.com or on Twitter @mattkrantz.