By Patrick Gillespie at CNN
Corporate America's profits are getting crushed this earnings season.
Apple (Tech30), Chipotle ( ) and Twitter ( , Tech30) each got thumped Wednesday after reporting weak or disappointing earnings. Twitter and Chipotle have their own distinct failures, but Apple, like many, is also a victim of the global slowdown.,
Weak global growth is closing consumers' wallets, while the strong dollar is only making iPhones and other American goods more expensive for foreign buyers. Add on still-low oil prices and Corporate America is facing major headwinds.
"It's like these companies are trying to play basketball but the tar is melting and sticking to their sneaks. Not fun to watch," says Jack Kramer, co-founder of MarketSnacks, a financialnewsletter.
Apple's stock quickly fell more than 7% when markets opened Wednesday after it revealed itsfirst annual sales growth decline since 2003. Reeling from its E. coli scare late last year, Chipotlereported its first quarterly loss ever and its stock dropped about 5%. And Twitter's stock spiraled 15% lower on Wednesday after its results missed estimates.
They're not alone. Big oil, tech and other former bull market studs like Starbucks () are getting burned this quarter too. Earnings for energy companies are down a whopping 110% compared to a year ago.
Consider this: seven of the 10 major sectors in the S&P 500 are in the red so far this quarter. A year ago, only two sectors suffered profit drops, according to S&P.
Tech companies' earnings are down nearly 6% this quarter. Embodying the trend is Google (by the strong dollar, which hurt overseas sales.Microsoft ( , Tech30) also lost overseas revenue due to the strong dollar.). It got pounded
Tech firms' lackluster earnings are reflected in theNasdaq's weak performance in 2016: It's down 3.4% so far this year, the worst of the three major U.S. indexes.
With disappointing earnings like these, it's no wonder investors are worried about stocks getting too pricey. One key measure for value -- the price-to-earnings ratio -- shows stocks are at their most expensive point since 2009. The S&P 500 is trading at about 17.8 times its forward earnings, compared with 15.2 in mid-February.
Despite the recession in corporate profits, the Dowactually neared an all-time high last week, highlighting the disparity between weak earnings and rising valuation.
One wake-up call could come Wednesday afternoon when the Federal Reserve makes a big announcement that tends to move markets. There's very little chance of a Fed rate hike Wednesday, but investors will be tuned into whether the central bank suggests that one ispossible in June. Investors hate surprises and prefer low rates. Any hints of a rate hike could send markets even lower.