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Wall Street earnings season arrives with bar set low


Throw out the macro, global worries for the moment. Company-specific micro matters are now king on Wall Street, as the start of the third-quarter earnings season picks up this week with reports from the nation’s biggest banks and bellwether names in the technology sector.

Wall Street knows there’s an economic slowdown in China. Investors know capital has been exiting hard-hit emerging markets. Money managers also know the U.S. stock market is trying to rebound from its first 10% correction in four years and that the Federal Reserve is still not ready to hike interest rates.

What Wall Street doesn’t know is how big a negative impact all of these headwinds have had on the profitability of U.S. companies. Monday will be a quiet day due to the Columbus Day holiday, as no companys are set to report earnings today.

But the multi-week parade of profit reports begins Tuesday.

Analysts are forecasting weak earnings growth for the third-quarter. They see profits for the Standard & Poor’s 500 index contracting 4.5%, although profits are seen growing 3% if you strip out the hard-hit energy sector, which is slated to see a drop in earnings of 65%, according to Thomson Reuters. If there's good news, it's that the earnings bar has been set so low that most Wall Street pros expect actual results to top low expectations, giving the stock market a lift.

The first big week of earnings will provide color into the health of U.S. banks. JPMorgan Chase reports Tuesday, Bank of America and Wells Fargo go Wednesday, with Citigroup and Goldman Sachs reporting Thursday.

Tech investors will get results from old tech (chip maker Intel reports on Tuesday) and new tech (Google and Netflix report Wednesday).

In all, 36 companies in the S&P 500 will report profit results this week, as well as six  stocks in the Dow Jones industrial average, Thomson Reuters says.

By the end of the week, Wall Street will have a better idea if this will be the first negative quarter for earnings since 2009 -- and stock investors will also have a better gauge as to whether the recent rebound rally has legs.