) -- A choppy (

albeit positive

) Monday aside, the cruel summer continues.

After falling roughly 5% each last week, the major U.S. equity indices wrapped up their worst four-week stretch since March 2009 on Friday. The

Dow Jones Industrial Average

is down 10.7% so far in August, gold continues to climb toward $1900 an ounce, and the yield on the 10-year Treasury note is flirting with 2%. At some point valuation has to come into play for stocks but timing that call is the eternal challenge.

Sam Stovall, chief investment strategist at Standard & Poor's, highlighted the conundrum in a research note early Monday, using history as a guide to analyze the impact on earnings of a potential double-dip recession and where the

S&P 500

would be likely to bottom.

"Since 1948, the S&P 500 topped out a median eight months, and a mean of seven, before the recession started and one-to-three months before earnings peaked," he explains. "In the subsequent 15-19 months, EPS (GAAP EPS from 1948-1980, operating EPS thereafter) declined 15% to 20%."

Stovall also notes the trailing price-to-earnings multiple for the S&P 500 has sat at an average low of 12X-13X during the previous selloffs. Factoring all this in, he pegs the index's bottom in a range of 900 to 1030. The S&P 500 closed Monday at 1124.

"Of course, a lot of 'ifs' would have to be met, such as recession, declining EPS, eroding market multiples, etc.," Stovall writes. "Yet this target price range of 900-1030 based on EPS declines also approximates the average S&P 500 price declines of 22% to 30% associated with recessions since 1948, which places apotential decline from the April 29 recovery high of 1363 to between 960 and 1070."

This week promises to be one long wait for Federal Reserve Chairman Ben Bernanke's big speech way out west on Friday, so maybe the volatility will fade a bit in the interim.

Tuesday's economic calendar is light with just new home sales for July due at 10 a.m. ET. The consensus is at 310,000, while

is a tad less optimistic at 300,000.

The big earnings report for the morning is

H.J. Heinz


. The average estimate of analysts polled by

Thomson Reuters

is for earnings of 76 cents a share from the Pittsburgh-based food products maker in its fiscal first quarter ended in July on revenue of $2.79 billion.

That view calls for some improvement on the bottom line from Heinz, which missed by a penny last time around while delivering a lower profit on higher revenue. The stock is still up nearly 5% year-to-date, but Wall Street is skeptical with 10 of the 18 analysts covering the shares at either hold (9) or underperform (1).


(WSM) - Get Williams-Sonoma, Inc. Report

is up after the closing bell, and the San Francisco home products retailer is expected to post a fiscal second-quarter profit of 36 cents a share on revenue of $824 million. The company has topped the consensus in seven straight quarters but the size of its upside surprise has been coming down, and its first-quarter beat was 5.6% vs. double-digit surprises of 10%, 13% and 29% in the previous three quarters.

Merriman Capital maintained its buy rating on Williams-Sonoma on Monday ahead of the report, saying it expects the company to "slightly exceed" the consensus view and add that upside to its full-year outlook.

"While the financial market volatility and global slowdown is of concern, the company's minimal international exposure is a positive, in our view. We believe the company's strong balance sheet, tight cost controls and better inventory management should help it weather any slowdown," the firm wrote.

Merriman Capital's profit estimate is above the consensus view at 38 cents a share, and the firm's price target is a range of $44-$47 vs. Monday's close at $30.03, implying potential upside of 47-57%.

Other companies reporting results on Tuesday include

American Woodmark

(AMWD) - Get American Woodmark Corporation Report


Bank of Montreal

TheStreet Recommends

(BMO) - Get Bank of Montreal Report


Corinthian Colleges



Hain Celestial

(HAIN) - Get Hain Celestial Group, Inc. Report



(LZB) - Get LaZBoy Incorporated Report



(MDT) - Get Medtronic Plc (MDT) Report


Pacific Sunwear of California


, and

Trina Solar



The action in the financials will again get plenty of attention on Tuesday as Wall Street wonders just how low

Bank of America

(BAC) - Get Bank of America Corp Report

can go, and ponders the implications of

Goldman Sachs

(GS) - Get Goldman Sachs Group, Inc. (GS) Report

CEO Lloyd Blankfein

hiring a high-powered defense lawyer


The traditional leaders in a bull market, the banks are at least fulfilling that role on the way down this time around. Even after its nearly unprecedented conference call with investors earlier this month, investors big and small are clearly not convinced that Bank of America and CEO Brian Moynihan have a handle on the company's myriad problems.

As for Blankfein, it may simply be a smart choice to have representation given the stakes of the legal battles that lie ahead but the market may take it as a signal that another shoe is about to drop.


Written by Michael Baron in New York.


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