So far second quarter earnings season hasn't been very inspiring. This story in USA Today confirms some of the weak trends that I wrote about two weeks ago (See, "No Quarter for Investors," June 29, 2005.
Earnings growth is slowing to the single digit level while the number of companies failing to meet analysts' estimates is increasing. Higher oil will no doubt crimp profit margins at many companies in the near future.
Nonetheless, investors remain focused so narrowly on what the Federal Reserve will do next that I think there is a chance stocks could rally in the face of slowing earnings. All it would take is a signal from Greenspan and Co. that the tightening cycle will soon draw to a close.