Updated from 6:05 p.m. ET to include additional commentary on earnings season from Wells Fargo and latest after-hours prices.

NEW YORK ( TheStreet) -- Undaunted by all the negative commentary floating around ahead of the third-quarter reporting season? You're not alone.

Birinyi Associates pointed out Tuesday that earnings pessimism is nothing new and argued investors have been well-served in the past by blocking out the noise.

"While earnings may be a 'bump in the road' for some companies, with correlation at the lowest level since April, there are still opportunities for stocks to outperform going into the end of the year and the overall negative view of upcoming earnings has not been a convincing reason to exit the market over the past two years," the firm said.

For example, Birinyi noted there was similar talk ahead of the second-quarter reporting season, and when the smoke cleared, 67% of S&P 500 companies beat expectations, a tad better than the 66% quarterly average seen since 2000. What's more, the S&P 500 rallied to end the calendar third quarter up nearly 6% though Ben Bernanke had a lot to do with that.

Birinyi also looked ahead to better expectations for future periods, saying "strategists are still calling for 10.2% earnings growth in 4Q12, 5.5% in FY12 and 10.7% in FY13."

All fair points though the year-over-year decline in earnings expected for the third quarter shouldn't just be brushed aside. After all, it's the first backpedaling in profits since the financial crisis and every day seems to bring fresh evidence that weak business conditions in Europe and the relative slowdown of growth in China are being felt stateside.

In addition, those bullish forecasts for the fourth quarter, fiscal 2012 and fiscal 2013 may be a lot less rosy after companies finish issuing guidance this time around. There's an argument to be made that the low expectations may be something of a good bad sign for stocks, making it easier for companies to outperform, but let's not forget that declining profits are still declining profits.

True believers in equities can take some comfort in the fact that this recent rally isn't the product of excitement about earnings; it comes courtesy your friendly neighborhood Federal Reserve and its promise of maximum accommodation. What's more, valuations for stocks are reasonable by historical standards so while an earnings-inspired rally may not be in offing, a severe pullback also seems like a reach, barring a turn for the worse in Europe or the United States falling off the fiscal cliff.

Scott Wren, senior equity strategist at Wells Fargo, is another market watcher that thinks the gloom and doom rhetoric about this earnings season is overdone.

"Another earnings reporting season is upon us and the media is out in force warning that the results will likely be disappointing; as if this is novel news the market needs to digest," he said in emailed commentary late Tuesday. "The fact of the matter is most equity strategists have been looking for third quarter earnings to be poor for some time. Despite reports to the contrary, market participants are generally not 'on edge' and 'fearful' about what companies will be saying over the next few weeks. The market, in our opinion, is prepared to a large extent for the overall bad earnings comparisons that are about to be reported."

As for Wednesday's scheduled news, the earnings calendar is pretty light with Costco Wholesale ( COST), Progressive Corp. ( PGR), and Ruby Tuesday ( RT) among the few notables.

Costco gets the spotlight treatment here. Shares of the Issaquah, Wash.-based warehouse retailer are up more than 20% so far in 2012, hitting a 52-week high of $103.51 on Sept. 21. The move has pushed the valuation into elevated territory vs. the broad market as the stock trades a forward price-to-earnings multiple of roughly 22.5X, well ahead of the S&P 500 at 14X.

The average estimate of analysts polled by Thomson Reuters is for earnings of $1.31 a share from Costco in its fiscal fourth quarter ended in September on revenue of $31.69 billion. An in-line performance in what is typically the company's strongest quarter of the year would compare to a year-ago profit of $1.08 a share on revenue of $28.18 billion.

The sell side is split on the stock ahead of the numbers with 14 analysts bullish at strong buy (7) and buy (7), and 12 analysts in the bear camp at hold (8), underperform (3) and sell (1). The median 12-month price target sits at $99, offering little upside to Tuesday's close at $99.64.

Costco reported its September sales on Oct. 4 with net sales totaling $9.31 billion for the month and same-store sales rising 6%. McAdams Wright Ragen previewed the quarter last week after the release of the sales numbers noting higher gas prices and positive foreign currency translation gave the numbers a boost with traffic counts increased 4% and the average transaction rose a little more than 2%.

The firm, which has a hold rating and $98 price target on the stock, thinks an in-line quarter is the most likely scenario.

"We expect operating margins to improve," McAdams wrote. "With comps growth in the mid-single digits, the benefit of an extra week (17 weeks versus 16 weeks a year ago), and the growing impact of the membership fee increase (which took effect nearly a year ago), we expect operating margins to improve by 17 bps year over year (to 2.9%). We think there's some potential earnings upside, but in our view the stock is priced for perfection."

Check out TheStreet's quote page for Costco Wholesale for year-to-date share performance, analyst ratings, earnings estimates and much more.

The economic calendar features the Mortgage Bankers Association's weekly mortgage application activity index at 7 a.m. ET; wholesale inventories for August at 10 a.m. ET; the Treasury Department budget data at 2 p.m. ET; and the Federal Reserve's Beige Book report for September also at 2 p.m. ET.

Also, there's still the possibility that Apple ( AAPL) will tip its hand on an iPad Mini launch Wednesday as it's rumored the company plans to send out invitations to a media event tomorrow with the actual unveiling possibly coming as early as Friday or else sometime next week.

The stock could use some positive headlines because, factoring in Tuesday's 0.4% decline, it's still flirting with correction territory, dropping 9.8% since hitting an all-time high of $705.07 on Sept. 21. The selling has been attributed to a number of factors, such as labor unrest at Chinese manufacturing partner Foxconn, customer dissatisfaction with the Apple Maps application, a relatively tempered reception for the iPhone 5, and concerns the iPad Mini will cannibalize iPad sales, rather than be a significant growth engine.

Indicative of the shine coming off Apple, Nomura Research initiated coverage of the company with a neutral rating and a $710 price target. In a research note entitled "The Pie Is Almost Baked," the firm said thinks Apple should be able to meet current Wall Street projections for this year and the next but sees the potential for slowing growth further out.

"From 2014, developed market growth is seen slowing to single digits," Nomura said. "We expect emerging markets to drive growth thereafter; however, we expect this transition to undermine margins, due to a need for a lower-margin and potentially cannibalizing midrange offering, Android's likely dominance in application availability, and a lower availability of subsidies. We thus believe that iPhone gross margins could contract by up to 10ppt, and this drives our FY14 EPS estimate to 12% below consensus."

Of the near-term, Nomura expressed confidence that Apple won't disappoint compared to consensus but the problem with that is Apple's track record is to blow expectations away.

"Our supply-side checks in Asia (end-September visits) in combination with our new demand-side model suggest Apple's iPhone sales could slightly beat recently lowered expectations for fiscal Q1," the firm said. "Moreover, supply constraints suggest that demand for the iPhone and iPad mini is likely to spill over into Q2, supporting near-term earnings dynamics and the share price."

That tone isn't exactly negative but it's also a far cry from the gushing euphoria that's dominated sell-side commentary about both the company and the stock for so long

That's not to say there isn't positive commentary out there. Here's the take of Sterne Agee, which has a buy rating and $840 price target on Apple.

"In sum, we believe concerns are overdone and this appears to be a typical consolidation after a big run," the firm said. "From our supply chain checks, demand remains robust with improving production and the bottleneck moving to assembly of the iPhone 5 itself vs. component constraints. In addition, we are picking up much increased component activity with what appears to be for an iPad mini."

And finally, it was a busy after-hours session as Alcoa ( AA) got the previously mentioned third-quarter earnings season off to a positive start by delivering a surprise profit. Shares of the Dow component were last down 10 cents at $9.03 in extended trades, pulling back after running as high as $9.40, with volume above 2.85 million.

Also active in late action was Yum! Brands ( YUM), whose stock was up more than 4% after the restaurant operator, whose brands include Pizza Hut, Taco Bell and KFC, lifted its outlook for the full year to adjusted earnings of at least $3.24 a share after beating Wall Street's expectations for its third-quarter results.

Netflix ( NFLX) is a candidate to continue its wild rise this week following news that CEO Reed Hastings plans to step down from Microsoft's ( MSFT) board. The stock ticked lower in late trades after surrendering nearly 11% in the regular session following a downgrade by Bank of America.

There was also some late ratings action as B of A downgraded both U.S. Bancorp ( USB) and Fifth Third Bancorp ( FITB) to neutral, citing valuation after the stocks have done so well of late. Fifth Third was down nearly 1% in the extended session to $15.74 on volume of more than 100,00, while U.S. Bancorp's stock was flat.

Of Fifth Third, B of A said: "While we continue to be bullish on the capital return story at FITB, we believe this is now largely accounted for in valuation. By contrast, capital return expectations are far more muted for money center banks, and investors that prefer to continue to invest in this theme will find more upside in C and JPM, in our view, than at regional banks generally."

-- Written by Michael Baron in New York.

>To contact the writer of this article, click here: Michael Baron.

Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

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