Fourth-Quarter Earnings: How Bad?

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Before that, companies with fiscal years ending in November continue to unveil results. Monsanto (MON), Bed Bath & Beyond (BBBY), and Family Dollar Stores (FDO) earnings are due on Jan. 7.

Bruce Bittles, chief investment strategist at Robert W. Baird, believes "earnings will be significantly under pressure for the next two quarters."

"Investors are expecting the worst in terms of the economy and earnings," Bittles adds. But, the stock market may begin to look ahead to an expected recovery in the second half of the year.

Fuzzy Math

With the market in turmoil and an economy in crisis, looking ahead will be especially difficult.

"This is a very difficult time because the normal metrics you usually rely on don't work," Buckingham says.

Indeed, the market's preferred signpost of stock valuations may be harder to read this time around. Earnings are important to investors as a reflection of a company's fundamental value, with many relying on the price-earnings ratio as a basic measure of a stock price's reasonableness. With few market participants sure where earnings are headed, calculating those p-e ratios has become an exercise in fuzzy math.

When earnings season begins, investors will be listening to executives' commentary very carefully for insight into future earnings trends, Sparks says. In the last quarter, many execs seemed befuddled by the changing environment, and many refused to predict future results.

That spooked the market, Sparks says. "That lack of news worries the market more than bad news," he says.

If investors get their wish, earnings seasons will give investors a bit more confidence in the future — even if that future is rather bleak and depressing.

But the stock market's recent rally could be stopped in its tracks by the opposite outcome. Yearend results could be as bad or even worse than feared, but investors could get no more insight into how long the economic pain will last. And as the old saw goes, there's nothing Wall Street hates more than uncertainty.

Steverman is a reporter for BusinessWeek's Investing channel.