Operating earnings for S&P 500 companies fell 14% from year-earlier levels in the third quarter. Srinivas Thiruvadanthai, director of research for the Jerome Levy Forecasting Center, said the earnings decline is a prelude to another economic recession. 'If you look at the past cycles, there have only been three occasions in which we have had an earnings decline of this magnitude without a recession following soon after,' said Thiruvadanthai. Thiruvadanthai’s negative assessment runs counter to that of Federal Reserve Chairwoman Janet Yellen who said the economy has 'recovered substantially since the Great Recession' in prepared remarks to U.S. Congress on Thursday. Yellen added that she anticipates 'continued economic growth at a moderate pace that will be sufficient to generate additional increases in employment and a rise in inflation to our 2% objective.' The odds of a December rate hike are currently at around 70%, indicating that investors are more confident than not that the first move higher in nearly a decade will happen before the end of the year. Thiruvadanthai said the decline in energy prices may be helping consumers, but oil at the $40 level has also inflicted a good deal of pain on the economy that could also increase in the coming year.

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