Double-Digit Profits Take a Dip

While overall results continue to be strong, a sector breakdown shows that changes are afoot in the marketplace. Energy, which has long been the red-hot growth sector of the U.S. economy, is expected to show some of the weakest results in the fourth quarter, with a year-over-year profit decline of 10% for the sector.

Chevron (CVX Quote) hinted of this reversal of fortune when it warned recently that its fourth-quarter results will be "adversely affected" by recent declines in oil and natural gas prices and lower profit margins. The oil giant raked in $13.4 billion during the first nine months of 2006.

Basic materials, estimated to show a 35% increase, is a new leader, thanks to strong performances from companies such as Alcoa (AA Quote), which already reported stronger-than-expected results last week.

But financials, which constitute 27% of the S&P 500, are providing the lion's share of the index's strength. The sector is expected to report an average 34% rise in profits.

The big investment banks, such as Goldman Sachs (GS Quote) and Morgan Stanley (MS Quote), have enjoyed windfalls from the flurry of mergers and acquisitions that took place last year.

Also, insurance companies such as Allianz (AZ Quote) and American International Group (AIG Quote) enjoyed the weather, Dropsey says.

"Insurance companies are reaping a big reward by not having to pay out a lot of money to hurricane victims this year like they were last year," he says.