Healthcare and Biotech Stocks Only Positives in Predominantly Negative Market

The recently completed third quarter will mark the fifth consecutive quarter of negative earnings growth for the S&P 500 index, says U.S. Sector strategist Brian Belski, with consensus expectations for year-over-year quarterly growth now at –7.4%.

But even that projection is overly optimistic, he says, as that represents a 1,550 basis point improvement over the second quarter - “an unlikely improvement given the challenging economic environment.”

In a research note, Mr. Belski says earnings outlooks have turned “dramatically negative” in recent weeks, with one in five companies exhibiting downward revisions. Financial and discretionary stocks once again exhibited the most dramatic negative revisions as the quarter unfolded, but the energy and materials sector also exhibited sharp pullbacks in earnings growth assumptions.Mr. Belski says that consensus expectations for the second half of 2008 (+9.4% for the S&P 500) are also “fundamentally flawed.” For example, he says, while aggressive moves by the Fed have begun to help alleviate..........

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