American companies are suffering their most disappointing quarterly revenue results since the depths of the financial crisis, suggesting investors will have to reset their expectations for areas of growth in the months ahead.
In Canada, miners and energy companies have fallen far short of second-quarter profit expectations, hit by a slump in global demand that is driving down commodities prices.
Many of the lacklustre results among S&P 500 companies that have washed over markets in the past several days are the result of Europe's slowdown and spreading debt crisis.
In a reversal of fortune, the multinationals and resource companies that led market performance over the past decade have suffered some of the worst setbacks, while companies focused on the North American economy are beating estimates.
Over the past week, coal producer Teck Resources has announced profits 18 per cent below projections. Energy producers Nexen Inc. and Canadian Oil Sands also fell well short of analysts' estimates.
All were casualties of a weakening global market for raw materials.
In contrast, Canadian National Railway and Canadian Pacific Railway, which generate all their revenue from North America, each beat profit expectations. Domestically focused Rogers Communications Inc. and Loblaw Cos. Ltd. also exceeded analysts' growth expectations.
Many of the same trends are apparent in U.S. markets, where companies are struggling to with the loss of the foreign growth on which they once relied.
"At 43 per cent, we're seeing the lowest percentage of S&P companies beating revenue targets since the first quarter of 2009," said John Butters, senior earnings analyst at Factset Research Systems.
Tobias Levkovich, Citigroup's chief U.S. equity strategist, noted that much of the weakness stems from weakening international markets, especially those in Europe.
Some 70 per cent of U.S. companies that have reported are beating earnings estimates, Mr. Levkovich said.
"The revenue misses are from cyclical areas like materials, autos and capital goods, where they sell a lot to Europe," he added.
The slowdown in emerging markets suggests that investors will gravitate to new investment themes with less dependence on economic growth.
Health-care stocks, for example, have outperformed in 2012 and continue to benefit from demographic factors – the aging Baby Boomer population – largely unaffected by the global economy.
The euro zone's financial crisis has kneecapped economic growth on the continent.
Manufacturing activity is shrinking at a 2.6-per-cent annual rate, cutting heavily into demand for raw materials.
The rapid slowdown has caused much weaker demand for imports, hurting emerging markets, particularly China.
That, in turn, has lead to a fall off in demand for raw materials.
In some areas, the global economy is now deteriorating faster than analysts can cut estimates.
Revenue forecasts for the energy sector have been slashed 11 per cent since mid-June, but actual results are being reported 20 per cent below the new forecasts.