Market Preview: Not So Great Expectations

NEW YORK (TheStreet) -- Those looking to second-quarter reporting season to bring the U.S. equity market back to the highs of the year despite softening economic data and Europe's debt crisis should be careful about getting their hopes up.

Like clockwork, trepidation about earnings season is starting to boil up just ahead of the first rash of reports that matter, i.e. the big banks like JPMorgan Chase(JPM) and Wells Fargo(WFC) , which are both due on Friday.

UBS is predicting the S&P 500 should be able to deliver a "modest" 2% beat overall, a performance that's reflected in its top-down estimate for a profit per share of $25.75 but the firm notes that the consensus view is indicative of "slower growth than we've experienced over the past three years."

Furthering the point, the four trends that UBS highlighted ahead of the quarter aren't exactly comforting.

"As we look at incoming data, four key trends appear most pronounced: (1) weaker growth and surprises; (2) a less favorable response to announcements by investors and analysts; (3) a negative impact from global exposure; and (4) a more challenging environment for Financials," the firm said, noting that consensus expectations have come down by 3.7% over the past seven weeks

The most worrisome of these trends could be the switch seen in global exposure, which has been a plus for many U.S. companies since the financial crisis. Already this quarter, a number of prominent names -- Procter & Gamble(PG) , McDonald's(MCD) and Ford(F) among them -- have disclosed weakness in business abroad.

"Non-U.S. (nominal) economic growth is expected to lag U.S. GDP in 2Q," UBS noted. "This is especially troubling for U.S. companies that have depended on faster growth abroad to fuel profits. Putting this into proper context, foreign GDP has outpaced U.S. growth by 3.9% since 2000, but is now expected to be an outright drag."

The firm continued: "More specifically, revenue growth for more globally oriented companies substantially outpaced their more domestically oriented peers throughout the recovery. However, over the past several quarters, this advantage has waned, reversing direction in 1Q."