Double-Digit Profits Take a Dip

Elsewhere, consumer discretionary, a sector that has been a focal point for bearish investors forecasting a slowdown in consumer spending, is expected to show a decline of 2%. But when homebuilders, such as Toll Brothers (TOL Quote) and Pulte Homes (PHM Quote), are excluded, the sector is expected to record an 8% increase.

The homebuilders continue to be hurt by a slumping U.S. housing market and have seen big profit declines, which are expected to continue into 2007. Lennar(LEN Quote), for one, has already warned that it will post a hefty loss for the fourth quarter.

The tech sector had a few scares, as chipmaker Advanced Micro Devices (AMD Quote) issued a profit warning last week that sent its shares tumbling. Xilinx (XLNX Quote) and Texas Instruments (TXN Quote) also warned in December of disappointments.

Elsewhere in technology, Motorola (MOT Quote) recently said its fourth-quarter sales and earnings would fall below its forecasts because of a shortfall in mobile device sales.

Telecommunications on the whole, however, looks headed for strong earnings growth for the quarter. Hugh Johnson, chairman of asset management firm Johnson Illington Advisors, names the sector as one place he is placing bets these days.

"I like AT&T (T Quote) and Alltel (AT Quote)," says Johnson.

He predicts overall earnings growth for the S&P of 9.5% based on his statistical analysis, but he suspects that results will be better than that.

"I expect a majority of companies to beat estimates, and my guess is that when all the numbers are in, we'll see yet another double-digit quarter," says Johnson.