Wall Street checks for slowdown

Wall Street has entered the period that might be called the storm before the storm: warnings season.

With second-quarter profit reports scheduled to stream in starting in mid-July, investors are watching for profit warnings over the next few weeks. Though this season has been pretty mild so far – more companies have issued upbeat guidance than warnings, noted Joseph V. Battipaglia, chief investment officer at Ryan Beck & Co. – Wall Street is keeping a wary eye on the consumer discretionary sector.

The sector – which includes industries that are most vulnerable to economic slowdowns, such as retail, autos and travel – was the biggest laggard last quarter, posting a 6.63 percent decline in profit, according to Standard & Poor’s data. And so far this month, a few big consumer brands have issued outlooks that disappointed Wall Street:

Starbucks Corp. fell 3.9 percent Thursday after warning it might not reach the top of its profit outlook. On Monday, Wendy’s International Inc.’s shares declined 3.7 percent after it warned its full-year profit would fall short of Street expectations. Bed Bath & Beyond Inc. fell 5.4 percent after the home furnishings retailer forecast earnings per share that fell under Street expectations.

“An awful lot of focus will be on retail in general,” said Jonathan Armitage, head of U.S. large-cap stocks for Schroders Investment Management.