Market Preview: One Bad Apple

Both The Wall Street Journal and The New York Times published analysis pieces Tuesday that basically interpret recent comments from Federal Reserve officials as indicative of the central bank getting closer to opting for additional stimulus, although there was very little new information in either piece.

In other words, the drumbeat for QE3 is getting louder whether Ben Bernanke likes it or not, and there's very little in the latest headlines for the bulls to hang their hats on. Wherever you look, corporate earnings, U.S. economic data, China, Europe, the positives all have caveats and the negatives are unremitting.

As for Wednesday's scheduled news, two Dow components -- Boeing(BA) and Caterpillar(CAT) -- are slated to report their quarterly results. Wall Street is looking for earnings of $1.12 a share on revenue of $19.37 billion from Boeing, while Caterpillar is expected to deliver a profit of $2.28 a share on revenue of $17.11 billion.

A quick word of warning on Caterpillar, courtesy of Thomson Reuters, which notes sentiment on the sell side has soured significantly (say that five times fast) in the past few weeks.

"Analysts expect that slowing construction and mining activity will finally catch up to Caterpillar, and they are lowering their estimates accordingly," the firm said. "One area of strength for Caterpillar is its equipment rental business. However, since customers can rent equipment as needed instead of purchasing the same equipment, this is likely reflective of the lower demand for equipment in general."

Greg Harrison, corporate earnings research analyst at Thomson, said earnings estimates for the Peoria, Ill.-based heavy equipment maker have come down 3% for the second quarter despite a strong track record of beating the consensus view with seven of its past eight quarterly reports. This turn in Wall Street's opinion only heightens the importance of the company's outlook tomorrow.

"When Caterpillar reports on July 25, all eyes will be on their outlook to see whether the negative change in analyst sentiment is indicative of future struggles for the company or a temporary downturn in an otherwise strong record throughout a challenging economic environment," Harrison wrote.