The danger in first quarter earnings season that starts on April 10

03/21/2012 1:26 pm EST

Focus: STOCKS

Jim Jubak

Founder and Editor, JubakPicks.com

First quarter earnings season doesn’t officially start until Alcoa (AA) reports on Tuesday, April 10, but I’m already seeing signs that Wall Street analysts are buckling their seatbelts in preparation for a bumpy ride.

The current read is that first quarter 2012 earnings for the stocks in the Standard & Poor’s 500 will come in 0.5% below earnings for the first quarter of 2011. That would be the first year-to-year drop in quarterly earnings since the third quarter of 2009.

There’s no one big culprit to the drop, according to analysts, but rather lots of modest declines adding up to an overall drop. The strong dollar, as a result of the turmoil of the Greek debt crisis, will cut into profit margins. Slower growth in emerging economies such as China will reduce sales. Commodity prices have crept higher, again reducing margins.

Revenue for the S&P 500 stocks is expected to climb by 3.5% from the first quarter of 2011, but profit margins are projected to fall for the first time in two years.

One result of expectations for a blah earnings season is that some companies are jostling for position at the front of the earnings parade so they can get their good news out while investors are still in a mood to notice. JPMorgan Chase (JPM) is always near the first of the big banks to report, but this quarter Wells Fargo (WFC), which usually reports well down the bank schedule, has moved its earnings report up. Now both banks will report earnings before the New York market opens on Friday, April 13. Think maybe Wells Fargo believes it has a good story to tell?

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