Financial downturn 2009. What are the predictions?

Financial downturn discourages the companies to make money, prompting analysts to slash profit outlooks and investors to dial down their early-year optimism. Financial and consumers sectors observe profit woes. They have spread to virtually every corner of the economy. The processes of losing jobs as well as spending less money surprise nobody. In fact CEOs running businesses that sell aluminium, computer chips, movies and all types of consumer goods are racketing down profit expectations. They also are offering little insight on when business will pick up. It is predicted that the economic and profit recoveries will take longer than expected. Stocks typically turn up in advance of a recovery. 

However, more and more financial institutions suffer from global financial stress. The bleak outlook, which was reinforced by 524,000 job losses in December the second-consecutive month that more than half a million people got pink slips is spooking investors. An early-year rally has fizzled, with stocks falling the past three sessions, erasing a 3% gain. The Dow Jones industrials closed Friday at 8599, leaving it down 2% in 2009.

According to the number of Standard & Poor's 500 company reports profits will be worse for the final quarter of 2008 are outpacing positive ones by more than 4-to-1, double the long-term average. Earnings reporting season for the final quarter of 2008 starts this week with aluminum maker Alcoa stating results today. Also analysts, who are known for its optimistic predictions, thought profits would turn positive in the just-completed quarter and were expecting profit growth of 46.7% for the S&P 500. As of Friday, they were expecting a drop of 15.1%. A big chunk of the lower forecast has come in 2009, with expectations falling from a drop of 1.2% on Jan. 1. So it is clear that earnings will keep falling.

Source: USA Today