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Stocks Rally Despite Forecast for Weak Earnings Growth

  • S&P 500 in best pre-reporting season performance in five years
  • Yet 3Q estimates point to biggest profit slowdown since 2011
A pedestrian views a mobile device while walking past an American flag displayed outside of the New York Stock Exchange (NYSE) in New York, U.S., on Monday, July 3, 2017. U.S. stocks rose in light trading and the dollar strengthened as factory data bolstered optimism in the strength of the American economy. Crude climbed for an eighth day.

A pedestrian views a mobile device while walking past an American flag displayed outside of the New York Stock Exchange (NYSE) in New York, U.S., on Monday, July 3, 2017. U.S. stocks rose in light trading and the dollar strengthened as factory data bolstered optimism in the strength of the American economy. Crude climbed for an eighth day.

Photographer: Michael Nagle/Bloomberg

If stocks anticipate profits, investors clearly expect something big when companies start reporting results next week. The S&P 500 Index has climbed 3.6 percent in a month, the best pre-earnings season in five years.

But don’t tell that to Wall Street analysts, who have cut their estimates for S&P 500 income growth by more than half. At 3.6 percent, they’re now predicting the biggest slowdown since 2011 after profits expanded about 11 percent in the March-June quarter.