Market Preview: Plenty of Warnings

Updated from 6:04 p.m. ET to include added information about PetSmart being named to join the S&P 500.

NEW YORK (TheStreet) -- Maybe QE3 is more a market savior than accelerator?

That's the sentiment of David Bianco, chief U.S. equity strategist at Deutsche Bank, who doesn't see any reason to boost his S&P 500 target for 2012 in the wake of the Federal Reserve's pledge of maximum accommodation until the economic recovery solidifies and shows signs of real traction.

"Recent economic reports suggest that the Fed's latest stimulus efforts were ahead of the curve," he said in commentary on Monday. "Unfortunately, 1H12 US GDP growth disappointed and US exports and manufacturing sharply decelerated through 3Q12. We welcome the Fed's actions given these disappointments and we are encouraged to see monetary policy ahead of the curve, but we would have preferred to see US and global growth improve. Thus, we do not see QE3 as a positive to our 1475 year-end S&P 500 target, but rather an offset to the negative developments in US exports, US investment spending and global manufacturing activity."

Bianco isn't expecting third-quarter earnings season to be a boon to market sentiment either. According to data from Thomson Reuters, analysts are currently anticipating a 2.1% year-over-year decline in earnings from the components of the S&P 500, a performance that would provide scant reason to put money into equities at this stage of the game.

"3Q reporting is likely to exacerbate investor anxiety about growth and elections," Bianco said. "Energy and Materials will bear the brunt of the y/y decline in 3Q EPS, but subpar growth is expected at all sectors. Five sectors expected to post y/y EPS declines and more than 5% growth at the rest. Weak 3Q EPS may not shock investors, but fewer companies beating and more missing estimates will exacerbate pre-election investor anxiety. 5 of the 20 Aug. qtr-end companies to report missed."

Tobias Levkovich, chief U.S. equity strategist at Citigroup, was also putting a spotlight on third-quarter results, which will start dribbling in later this month with Alcoa (AA) kicking things off for the Dow on Oct. 9.

"With more than 120 S&P 500 companies having pre-announced thus far, the trend is quite adverse, with a negative-to-positive ratio of 4.3, the highest level since 1Q09's 4.7 and 4Q08's 4.0. Moreover, this compares to more favorable ratios of 2.6 in 3Q11 and 3.3 in 2Q12," he said.

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