Expectations for full-year earnings growth for companies in the Standard & Poor's 500 index have dropped from a sunny 15. 7 percent at the...

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Expectations for full-year earnings growth for companies in the Standard & Poor’s 500 index have dropped from a sunny 15.7 percent at the start of 2008 to a more sedate 10 percent, and more fine-tuning may lie ahead.

While first-and second-quarter S&P estimates call for declines in profitability, expectations are still for healthy third- and fourth-quarter growth.

“The equity market has not yet fully priced in a prolonged downturn in economic growth in my opinion, and earnings estimates for the second half of the year are likely still far too high, reducing the upside for stocks,” writes Wells Fargo economist Scott Anderson in a client note.

Ashwani Kaul of Thomson Reuters thinks profit gains will clock in between 7 and 10 percent for 2008, an improvement from last year’s 3.3 percent decline.

“It’s particularly hard to predict what’s going to happen now,” he says.

Wild cards include surging oil prices, unsteady credit markets, falling consumer spending and a still-weakening housing industry.

The consumer discretionary sector is expected to contribute to growth.

Granted, restaurants and clothing retailers are struggling as consumers budget more for essentials like food and fuel. But JPMorgan U.S. equity strategist Thomas J. Lee says earnings estimates do not factor in an expected bump from government stimulus checks, which began distribution Monday.

Lee recently raised his rating on the sector to “overweight” from “underweight.”

Expected growth in the hard-hit financial sector may be harder to come by. Financials would have to post combined earnings of $47.3 billion in the fourth quarter, compared with a $20.7 billion loss in the year-ago quarter, to meet expectations, according to Thomson Reuters.

Citi Investment Research analyst Robert Buckland rates the sector “underweight.” He says further earnings estimate cuts are on the horizon, fueled by asset write-downs, rising loan-loss provisions and weaker loan demand.