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Markets down, earnings up Add to ...

Stock selling has accelerated during Tuesday’s session, as investors weigh the uncertainty growing in Europe following two national elections on the weekend.

Concern appears to be mounting that a coalition of left-leaning parties in Greece will form the new government and renege on bailout agreements, repeal labour reforms and nationalize banks.

In Toronto, the S&P/TSX composite index has plummeted 241.75 points, or 2 per cent, to 11,618.91, lead by the materials sector, which is down almost 5 per cent. Kinross Gold fell 6 per cent and Suncor Energy lost 3 per cent.

In New York, the S&P 500 was down 18.46 points, or 1.4 per cent, to 1351.12. All sectors were in the read, including energy, down 3 per cent, and materials, down 2 per cent.

Losses may continue, but in the long run markets react to corporate earnings, and so far this earnings season has surprised on the upside.

Among S&P 500 companies, 441 have now reported first-quarter results, with 292 beating estimates, 104 missing and 45 meeting them, according to Standard & Poor’s Capital IQ.

At the beginning of April, expectations were for profit growth just shy of 1 per cent, compared with the first quarter of 2011. Today, with most results in, the consensus is that profits will rise by more than 7 per cent. For the full year, expectations are for earnings to increase by 7.4 per cent, up from expectations of 6 per cent at the start of April.

Just a month ago, the health care and financials sectors were seen as laggards that would weigh down overall results. But both delivered better-than-expected performance. The decline in profits for the materials sector was just half of expectations and telecom profit slid only 5 per cent, rather than the forecasted 16 per cent.

In terms of revenue, expectations are for overall growth of 6 per cent in both the first and second quarters, and of 7 per cent for the full year, Capital IQ says.

Those numbers are worth considering as emotions heat up again around Europe’s lingering debt crisis.

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