Greece Bailout Could Spark Contagion, Pushing U.S. Corporate Earnings Lower

Greece’s problems could soon be felt in the United States. ‘If Greece’s creditors cut its debt, I think you’re going to see other countries that have had similar trouble, asking for the same type of concessions,’ said Ian Winer, head of equity trading at Los Angeles, Calif-based Wedbush Securities, referring to Portugal, Italy and Spain, which face debt crises of their own. ‘That means the dollar is going to get a lot stronger and that’s not good for U.S. multinationals and will result in lower earnings.’ Greece is asking European creditors for a $59.4 billion bailout, in exchange for spending cuts and other reforms that were previously rejected by Greek voters in a historic referendum held July 5. On Friday, the euro gained almost 1 percent against the dollar, but lost 8.5 percent since the start of the year. Meanwhile, the outlook for corporate earnings isn’t looking bright. Second quarter earnings are expected to post a 4.4 percent year-over-year decline, according to FactSet. On March 31, analysts expected earnings to fall just 2.2 percent. Still, Winer thinks Greece’s troubles are just a hiccup for markets. He is more concerned about China.