Corporate profits are expected to show gains from a year earlier but some earnings reports are showing the effects of weaker consumer spending, says Savita Subramanian, head equity strategist at Bank of America Merrill Lynch.

“So far, [consumer] staples has seen the most companies surprise to the downside, while consumer discretionary has seen among the biggest downward revisions, with fourth quarter earnings expected to come in flat year over year,” she said in a January 23 report obtained by Newsmax Finance.

Consumer staples include grocery and personal care products, while discretionary spending is seen in hardware stores, clothing, restaurants and entertainment.

Holiday sales at Macy’s Inc., Sears Holdings Corp. and J.C. Penney Co. were weak as online rivals like Amazon.com continued to lure more shoppers. Department-store sales fell 7.2 percent, the 23rd consecutive month of year-over-year declines, according to Commerce Department data.

Miss Estimates, Get Punished

One-fifth of the S&P 500 stock index reported earnings last week, which was considered the second week of earnings season, with financial companies showing better-than-expected results and the energy industry disappointing Wall Street.

“Sales expectations have drifted lower in January,” mostly from cuts in the energy and consumer discretionary industries, Subramanian said. “Analysts expect S&P 500 fourth-quarter sales growth of 3.8 percent year over year, still a pickup from last quarter.”

Sixty percent of companies have beaten Wall Street estimates on earnings, 54 percent have beaten on sales and 40 percent have beaten on both, according to BofA’s analysis.

Companies that beat profit and sales estimates gained by 1.6 percent on average the following day, while stocks that missed forecasts fell by 4.7 percent on average, “a near-record punishment for misses.”

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