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Relax. The sky isn't falling. But with high-profile

earnings warnings dominating market chatter, there are a few more clouds looming than in the recent past as the third-quarter earnings season begins in earnest next week.

A confluence of factors is expected to contribute to a slowing in earnings growth in the third quarter of 2000, but not a severe one. Higher fuel costs and currency-related issues, as well as reduced consumer and business demand resulting from the

Federal Reserve's more restrictive interest-rate policy have analysts projecting year-over-year

S&P 500 earnings growth of about 15% for the quarter on a market cap-weighted basis, according to

First Call/Thomson Financial


However, because companies tend to beat analysts' estimates, both First Call and rival earnings tracker


expect actual third-quarter earnings to be up more like 19%. How does that compare? Earnings growth was 23.6% in the first quarter and 21.6% in the second quarter, according to First Call.

So growth is slowing, sure, but 19% earnings growth is hardly weak. The percentage of

preannouncements that have been negative, despite revenue warnings from high-profile names such as


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, was lower than the historical average, though higher than the first half of this year. And companies tend to beat estimates. While not matching the pace of the first half of the year, growth is still strong.

But the warnings from a number of diverse companies ranging across various industries have investors worried about larger implications that go beyond just this quarter. It's no small reason that prompted investors to drive the

Nasdaq Composite down 13% in September. The earnings that are about to be reported are forecast to be strong, but investors haven't heard that from the horse's mouth just yet.

"The market is taking punches it hasn't had to face in years; that's the reality of a slowing economy," said Ron Kraft, hedge fund manager at

Merchant Intercapital

. "Until investors actually hear from the management of the stocks

they own that things are good will they go to sleep at night without having to worry."

Earnings season gets rolling tonight with

Micron Technology's

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report after the close.

Dow component


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reports tomorrow. But it explodes in full force next week and continues through the month.

Beyond numbers, investors will also be looking for guidance from companies as to how they see their future prospects. As good or bad as third-quarter earnings are, they're in the past. Investors want to see how companies view their outlook for the fourth quarter.

Companies themselves will hope to achieve greater clarity about the economic outlook. Oil prices remain around $32 a barrel, higher than had been expected. These prices hurt everyone from transportation companies to refiners to plastics companies to auto manufacturers, which have had gotten used to lower energy prices. Companies will now be modeling future earnings growth on higher energy prices.


euro remains an issue. While currency-related translations can be combated through hedging, companies that do business in dollars may see demand sapped because of the rising costs of goods for Europeans. Several companies have blamed the sagging euro for weaker-than-expected quarterly earnings.

For the third quarter, not surprisingly, energy and technology companies are expected to show the strongest year-over-year growth. Airlines, telephone utilities and biotechnology companies are expected to show the weakest year-over-year growth.

Most Tech Pockets Strong, but Not All

According to


, most technology sectors are expected to show strong year-over-year comparisons again, with the exception of software, which benefited from last year's Y2K preparation surge. Semiconductors, despite the revenue concerns out of Intel, are expected to show overall earnings growth of 107.5%, down from 134% year-over-year growth for the third quarter of 1999. The ubiquitous chip technology is not just employed by PC makers, but also in a variety of new technologies, such as cell phones and other hand-held devices.

Photo-optical equipment companies are expected to show growth of 71% on a year-over-year basis, a rate that could remain steady as costs in that industry decline and products become more affordable. Last year, growth was 63%, according to I/B/E/S.

Computer manufacturers are expected to show growth rates of 35% to 37% for the quarter, compared to growth of 12.2% at this time last year. Joseph Kalinowski, analyst at I/B/E/S, believes PC makers are in for a tough second half, citing weakened demand and the warnings issued by

Intel, which supplies chips to the industry, and


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wrote a separate article about how

Apple was shaking up the PC tree.

The Big Story: Oil

Outside of technology, it's all about energy stocks. Oil stocks are expected to show growth of 89.5% on a year-over-year basis, according to I/B/E/S, up from 42% growth at this time last year. Black gold

prices have increased dramatically over the last year, oil producing nations are pumping at high-capacity levels and demand for energy products is strong throughout the world.

Conversely, transportation companies, affected directly by higher energy costs, are expected to show less impressive growth. Growth for trucking companies should come in at a 13.5% rate; airlines, due to flight delays, wage issues and fuel costs, are expected to show growth of about 3%.

Among other industries, drug makers are expected to show growth of about 17%. Retailers are forecast to show growth of approximately 4.5%.

Despite the market's malaise, only a few industries are having trouble with earnings growth. That's something bulls can hang their hats on this earnings season -- whether that's the case in the fourth quarter is still unclear.

On the downside, telephone utilities are expected to show a 13% decline in growth, due to sluggish growth out of


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. Biotechnology stocks' earnings are forecast to decline about 9%.