We get into the heart of the Q4 earnings season this week, with 485 companies reporting quarterly results, including 121 S&P 500 members. With results from 201 index members already on the books, we will have seen Q4 results from over 63% the S&P 500 members by the end of this week.

The picture emerging from the results that we have seen already is one of all around weakness, with growth hard to come by in the slowing global economy, the strong U.S. dollar, and weakness in the oil and other commodity sectors. This isn’t a new problem, we have been discussing these headwinds the last few reporting cycles as well. In other words, the earnings recession continues with Q4 earnings for the S&P 500 index on track to be below the year-earlier level – the third quarter in a row of negative earnings growth for the index.

Recent weakness in oil and other commodity prices has effectively guaranteed that this negative growth trend will continue into the current and following periods as well. In fact, all of the earnings growth for the S&P 500 index in 2016 is now entirely expected to come in the back half of the year, with growth in the first half of the year now expected to be in the negative.

Q4 Scorecard (as of Friday, January 29th)

Total earnings for the 201 S&P 500 members that have reported results already are down -3.2% on -3.6% lower revenues, with 72.6% beating EPS estimates and 47.8% coming ahead of top-line expectations. With these 201 index members accounting for 54% of the index’s total market capitalization, we have effectively crossed the halfway mark in the Q4 reporting cycle.

The table below provides the current Q4 scorecard

The aggregate growth picture is actually even weaker once adjusted for the +8% growth in the Finance sector, which itself is benefiting from easy comparisons at Citigroup (C - Analyst Report). Excluding the Finance sector, total earnings for the rest of the index members that have reported results would be down -6.1% on -4.5% lower revenues.

The charts below provide a comparison of the results thus far with what we have seen from this same group of 201 S&P 500 members in other recent periods.

As you can see in the above chart(s), while growth for these 201 index members is notably below what we had seen from the same group of companies in other recent periods, the beat ratios are in-line or better relative to other recent periods. This likely means nothing more than estimates had likely fallen more than they needed to in the run up to the start of the Q4 earnings season.

This growth & surprise dichotomy is particularly notable for the Technology sector, though surprises have been fairly numerous in the Medical and Finance sectors as well. We referred to the Finance sector earlier. For the Medical sector, earnings for the 51.3% of the sector companies that have reported are up +7.6% from the same period last year on +9.1% higher revenues, with 81% beating EPS estimates and 71.4% beating revenue estimates.

With results from 31 of the 64 Tech sector companies in the S&P 500 index already out that combined account for 69.8% of sector’s total market in the index, total earnings for the quarter are down -1.6% on +1.1% higher revenues, with 90.3% beating EPS estimates and 71% beating revenue estimates. You can see in the right-hand side chart that positive surprises for the sector, both earnings as well revenues, are tracking above other recent periods.

In terms of weak revenue surprises, the sectors that stand out include Basic Materials (only 9.1% have beat revenues), Transportation (only 10% beating revenue estimates), Retail (15.4%) and Construction (20%).

Q4 As a Whole

The composite (or blended) growth rate for Q4, combining the actual results from the 201 index members that have reported results with estimates for the still-to-come 299 members, shows total earnings declining by -6.0% from the same period last year on -4.6% lower revenues, the third straight quarter of earnings declines for the index.

While Energy remains the big drag, as it has been in other recent quarters, the weakness is broad-based, with 11 of the 16 sectors expected to suffer earnings declines. Total earnings for the Energy sector are expected be down -79.1% on -37.8% lower revenues. Excluding Energy, earnings growth for the S&P 500 would be modestly in the positive (up +0.4% on -0.2% lower revenues).

The table below provides a summary picture of Q4 expectations contrasted with what was actually achieved in the preceding quarter.

Please note that the growth picture is actually even weaker once Finance’s +9.7% growth in Q4 is adjusted for the easy comparisons at Citigroup. Excluding Citigroup, the Finance sector’s growth drops from +9.7% to -1.1% and the index’s decline changes from -6.0% to -5.1%.

Looking Beyond 2015 Q4

While earnings growth was negative in the last three quarters, the outlook for the current and following periods doesn’t look any better. Estimates for 2016 Q1 have started coming down at an accelerated pace, with total earnings for the quarter now expected to be down -5.5% from the same period last year. This is down from the roughly flat growth expected for the period in mid-November. The picture for the following quarter isn’t looking that much better either, as the chart below shows.

A big part of the recent negative revisions reflect developments in the oil patch, but the outlook for the other sectors isn’t that inspiring either, with estimates for the other sectors coming down as well. The chart below shows that 2016 Q1 estimates are in the negative even on an ex-Energy basis.

As you can see in the chart below of quarterly growth expectations, all of this year’s growth is now expected to come from second half of the year, with earnings growth in the first half now expected to be in the negative.

The relatively optimistic looking expectations for the outer periods aren’t unusual – Wall Street analysts always tend to be more optimistic about the future. But estimates start coming down as the period in question comes closer. The erosion of 2015 growth estimates was driven largely by what happened to the Energy sector. But estimates for other sectors came down as well…and we will likely see something similar to current 2016 estimates as well.