The data docket this week is on the light side, with the Q4 earnings season now effectively behind us and not much on the economic calendar either. The earnings season isn’t technically over yet as this week brings in results from more than 250 companies, including three S&P 500 members. But with results from 496 S&P 500 already on the books, the Q4 earnings picture is effectively carved in stone.

Most of the recent reports have been from the Retail sector and they have been no better than what we have been seeing from other sectors. This is somewhat puzzling given the widespread earlier expectation that improved household buying power, as a result of the energy savings, would show up in Retail sector results. Part of the explanation is the secular shift in spending trends from the brick-and-mortar operators to online merchants. The hyper competitive retail environment, in place for some time now, has also been a factor as are temporary seasonality factors. The bottom line is that the all-around growth challenges on display in other sectors this earnings season are very much present in the Retail sector’s earnings performance as well.

Total Q4 earnings for the Retail sector in the S&P 500 are up only +0.2% from the period last year, on +5.3% higher revenues, with 54.1% beating EPS estimates and only 35.1% coming ahead of top-line expectations. This is a weaker performance than we have seen from the same group of retailers in other recent periods, as the side-by-side comparison charts show.

Please note that the sector’s Q4 earnings performance isn’t any better when we look at the retailers in the small-cap Russell 2000 index. The charts below compare the sector’s Q4 performance for the small-cap index.

The growth challenges beyond the Retail sector are well known by now, reflecting a slowing global economy, the strong U.S. dollar, and weakness in the oil and other commodity sectors. This isn’t a new problem, we have been discussing these headwinds the last few reporting cycles and they are very much in place in the current period as well. We will give you the final scorecard for 2015 Q4 a little later, but let’s discuss the weakening growth picture for 2016 Q1 first.

Falling Current Quarter Estimates

Total Q1 earnings growth for the S&P 500 index is currently expected to be -9.3%, a material decline from what was expected for the quarter in early January. Developments in the oil patch are driving a big part of the negative revisions, but there is plenty of negative momentum in other sectors as well. Estimates for the Technology and Finance sectors have been coming down lately. Take for example the Zacks Consensus EPS estimates for bellwether players like 

Apple

 (AAPL)  and J.P. Morgan (JPM) from these two sectors. The current Q1 Zacks Consensus EPS estimate for Apple is $1.98, which is down from $2.35 two months back while the same for J.P. Morgan has dropped from $1.51 to $1.36. Estimates for other major players in these two sectors like Intel (INTC), Microsoft Corp (MSFT), Bank of America (BAC) and Citigroup (C) have similarly come down.

The chart below shows how estimates for 2016 Q1 have evolved since the start of the quarter. Please note that the magnitude of negative revisions to Q1 estimates is the highest of other recent quarters in the comparable periods.

The chart below shows the effect of the Energy sector on the evolving Q1 growth picture. As you can see, Q1 earnings growth would be in the negative even on an ex-Energy basis.

The growth outlook for the following quarter isn’t much better either. In fact, all of the earnings growth for the S&P 500 index in 2016 is now entirely expected to come in the back half of the year, with growth in the first half of the year now expected to be in the negative.

The relatively optimistic looking expectations for the outer periods aren’t unusual – Wall Street analysts always tend to be more optimistic about the future. But estimates start coming down as the period in question comes closer. The erosion of 2015 growth estimates was driven largely by what happened to the Energy sector. But estimates for other sectors came down as well and we are seeing a replay of that trend in 2016 estimates as well.

2015 Q4 Scorecard (as of Friday, March 4th)

Total earnings for the 496 S&P 500 members that have reported results already are down -6.1% on -4.1% lower revenues, with 64.6% beating EPS estimates and 44.3% coming ahead of top-line expectations. At this stage, the Retail sector is the only one with more than 1 report still to come; the reporting cycle is effectively behind us for most of the other sectors.

The table below provides the current Q4 scorecard:

Earnings growth for 7 of the 16 Zacks sectors is in the negative, with the Technology & Finance sectors – the two biggest sectors in the index – showing growth of +0.0% and +0.3% from the year-earlier level. The Finance sector was earlier in the positive column, thanks to easy comparisons at Citigroup, which has since been more than offset by tough comparisons at AIG (AIG)

The charts below provide a comparison of the results thus far with what we have seen from this same group of 496 S&P 500 members in other recent periods.

As you can see in the above chart(s), this is weak performance than we have seen from the same group of companies in other recent periods.

- See more at: http://www.zacks.com/commentary/74223/retail-results-as-weak-as-other-sectors?cid=CS-TALKMARKETS-FT-74223#sthash.MOaMjqsn.dpuf