While some of the last companies in the S&P 500 index are reporting third-quarter earnings, investment analysts expect the growth rate of the index to be down 22 percent from the third quarter of 2007.
Financials, utilities, telecommunications and consumer discretionary sectors are all expected to ultimately post losses in the third quarter, while the energy and consumer staples sectors, classically defensive sectors, are expected to post high single-digit to low double-digit earnings, according to Bill Stone, chief investment strategist for PNC.
Stone and PNC agree with economists that the U.S. economy will go through a “moderate-to-severe recession extending through the first half of 2009.”
The sectors where growth is expected in the beginning of 2009? Health care, consumer staples and technology, according to analysts with Brown Brothers Harriman Research and Thomson Financial.
“Energy and materials sectors, two of the most economically sensitive sectors, have seen the most severe estimate cuts,” Stone said.
Federal Reserve Chairman Ben Bernanke has said he would work closely with other central banks to try to alleviate the global financial crisis and left open the door to a fresh interest rate cut. The Fed is scheduled to meet Dec. 16 at its last regularly scheduled meeting this year.
While Wall Street would like to see another rate cut, many investors aren’t sure of how effective a rate reduction would be in the near term. Many investors are still trying to assimilate to the idea that the economy’s downturn would be protracted, lasting well into next year and perhaps longer.
“The realization that 2009 is going to be a very bad year for economic activity is starting to dawn on people and they are starting to digest how bad it’s going to be,” said Ben Halliburton, chief investment officer of Tradition Capital Management.
The Associated Press contributed to this article.
Examiner Top 10
The Examiner Top 10 portfolio began Jan. 2, the first trading day of the year, with the hypothetical purchase of one share in each company.
Friday’s closings
Purchase Close Percent
Name price Nov. 14 Change Change
Ciena Corp. $33.78 $6.66 -$27.12 -80.3
Constellation Energy $102.13 $24.62 -$77.51 -75.9
Legg Mason $73.25 $16.01 -$57.24 -78.1
Lockheed Martin $105.77 $74.45 -$31.33 -29.6
McCormick & Co. $37.75 $31.17 -$6.58 -17.4
Northrop Grumman $78.74 $41.06 -$37.68 -47.9
Provident Bankshares $21.43 $9.03 -$12.40 -57.9
Southwest Airlines $12.18 $10.29 -$1.89 -15.5
T. Rowe Price Group $59.80 $31.94 -$27.86 -46.6
Under Armour $43.69 $23.24 -$20.45 -46.8
