The US second-quarter reporting season has left investors with a mixed outlook for the rest of 2009, says Nicholas Colas, chief market strategist at BNY Convergex.

He points out that while earnings generally met or exceeded forecasts – following decisive cost-cutting measures in the first half – many companies chronically missed their revenue expectations in the second quarter.

“The market overall looked through these misses, much to the chagrin of the bears,” Mr Colas says.

But he says that having had a chance to reflect on the quarter’s results, analysts generally remain cautious with regard to revenue growth for the second half.

“Analysts are raising revenue estimates a tad more than they are lowering them. But the idea that the fourth quarter would be the inflection point of the current recession, where revenues turn positive year over year, now looks to be at risk.

“When we contrast this caution with the positive stock price returns of recent weeks, it is easy to dismiss the market’s enthusiasm as misplaced optimism.

“But we would offer a different slant. The market expects revenue expectations to rise in coming weeks, due to the recent spate of better than expected economic data. The greater number of positive revisions is a good start in that direction.”

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