Market Preview: Warnings Aplenty

NEW YORK (TheStreet) -- There's no sugarcoating it: Second-quarter reporting season is off to a rough start.

The warnings to begin the week -- Advanced Micro Devices (AMD), Applied Materials (AMAT), Cummins (CMI) and MAKO Surgical (MAKO) to name a few -- have been deep and drastic, adding to the mounting evidence that a slowing global economy is starting to weigh on U.S. corporate profits.

At the same time, as previously mentioned, expectations are pretty low going in. Making a call on how to play such a murky scenario is tough but Canaccord Genuity was out Tuesday advising investors to concentrate on the big picture.

"It is important to point out that other than from Q3/07-Q4/08, the final results were above the beginning of the quarter estimate by a meaningful margin in every quarter," the firm noted. "The point is that unless in the heart of a recession, estimates at the beginning of the quarter are too low - and we don't expect this one to be different until proven otherwise."

According to data from Thomson Reuters, earnings for the S&P 500 are expected to come in flat with year-over-year, excluding an outsized improvement by Bank of America (BAC), which recorded massive losses in last year's equivalent period because of its mortgage settlement.

Canaccord's view is that the technicals are still favorable and investors should act accordingly.

"The S&P 500 continues to work off a near-term term overbought condition in the context of an intermediate-term uptrend," the firm said. "In English, that means we are in a bull market, and while there could be some very near-term volatility and weakness as the market consolidates recent gains, until the trend of higher lows and higher highs is broken, any weakness should be bought."

So far though, the dip buyers are still enjoying a post-Independence Day vacation with both the Dow and S&P 500 losing ground in four straight sessions after Tuesday's choppy, low-volume decline. The bulls could be in for an extended holiday too because there just aren't many positive catalysts out there to support swooping in just yet.

Meantime, Fitch reaffirmed its Triple-A assessment of the long-term credit rating for U.S. sovereign debt after the close but left its negative outlook intact, citing the uncertainty presented by the looming "fiscal cliff." Right now, the firm doesn't expect the outlook to flip over to stable until late 2013.

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