Financial Profits Wipe Out

Wow, corporate profits are really looking terrible this earnings season. A week ago, Reuters Estimates, calculating from a mix of actual results and analyst projections, was estimating earnings for the S&P 500 were set to fall 10.6% in the fourth quarter of 2007. That’s already the worst in years. Today, after another week of results rolled in, Reuters Estimates now says we can expect corporate profits to fall 17.6%. Ouch. What’s the problem? It isn’t health care or technology firms. Those firms are expected to increase earnings 12% and 26% respectively. Rather, it’s a very familiar villain: The financial sector, where earnings are expected to drop 91%. In other words, nearly all profits from a year ago have been wiped out by the financial crisis.

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