Standby for terrible news from Wall Street ...
We are about to get confirmation that earnings growth for America's biggest companies was negative in the first quarter, compared to the same period a year ago.
When aluminum giant Alcoa releases its results on Monday, it will mark the unofficial start of the heaviest reporting season for S&P 500 companies.
The final scoreboard is expected to show a 9.1% earnings drop for the quarter, according to FactSet senior earnings analyst John Butters.
But the actual decline will likely be smaller, he said. Analysts have ended up being too pessimistic about most quarters since Q2 2013.
Still, earnings would be negative for a third straight quarter.
Earnings-per-share growth "has been slowing for the past six quarters, with current projections pointing to a bottom in 1Q16," he wrote in a client note.
However, Butters cautions that weakness could persist if factors like low commodity prices and a rising dollar do, too.
"Overall, we're looking for a 2.6% decline for Q2 as of today [April 8]," he said, forecasting that Q1 would mark the bottom.
Analysts became very bearish
Earnings expectations for S&P 500 companies usually tumble in the months leading up to the heavy reporting weeks.
This year, the drop was steeper than usual.
Earnings estimates have dropped 9% year-to-date, more than double the 4% decline typically recorded three months before earnings season, according to Bank of America Merrill Lynch chief equity and quant strategist Savita Subramanian.
The decline for some sectors was "quite realistic" because of anxiety after the sell-off that marked the worst-ever start to a year for stocks, according to Jeff Kleintop, chief global investment strategist at Charles Schwab.
But S&P 500 companies are already topping forecasts. Subramanian said in a note Friday that of the 22 companies that have reported, 82% have topped earnings-per-share forecasts, 64% have beaten on sales. And, 55% have beaten on both.
Kleintop thinks expectations have probably fallen too sharply for some sectors including consumer discretionary and maybe industrials.
"It wasn't a great quarter for financials, but it wasn't the end of the world," he told Business Insider..
"Ex-energy"
This chart shows that expectations for the energy sector are in their own league.
According to FactSet's projections, the sector will be the largest contributor to the expected decline in S&P 500 earnings.
But there are questions about whether oil prices are in a new normal, for now, and whether other sectors are not independently weak.
"People tend to do that when they want a clear picture of the total of the economy," Thompson told Business Insider. "They want to highlight just how much the impact is."
But doing this, said Thompson, paints a much rosier picture than reality.
"The aggregate is the aggregate and you can't just leave a whole part out when you're evaluating the economy," said Thompson.
Additionally, as Jesse Edgerton at JP Morgan pointed out, it would've been easy to strip out technology earnings or financial earnings at the beginning of the last two recessions, but that would not have been a good vision of the whole economy.
Or as Thompson put it, "Before prices came down, oil and gas were doing quite well. So you could make the argument that if you want to strip it out on the downside, why didn't you strip it out on the upside?"