At this time, the estimated growth rate for the third quarter 2008 stands at 0.8%. On April 1, the estimated growth rate for third quarter 2008 was 17.3%. On July 1, the estimated growth rate was 12.6%.

If the final growth rate for third quarter 2008 is 0.8%, it will mark the first quarter the S&P 500 has recorded earnings growth since the second quarter of 2007 (7.7%).

Since the start of the quarter, most of the decrease in the third quarter 2008 growth rate (to 0.8% from 12.6%) can be attributed to downward estimate revisions in the Financials sector.

At the sector level, the Energy (60%) sector is expecting the highest earnings growth in Q3 2008. The financials (-49%) and Consumer Discretionary (-7%) sectors are expecting the weakest earnings growth.

(Ed’s note: John Butters is director, U.S. earnings for Thomson Reuters Proprietary Research Group. To see the full research on the outlook for third quarter earnings expectations, download the PDF here:

The economy is a key issue in the presidential election, but Congress should hold off on a second economic stimulus package for now, a top supporter of Senator John McCain said Thursday.

“In states like Ohio, I think that jobs and the economy is the first issue and will be right through the election,” said Rob Portman, formerly a Republican congressman from Ohio, White House Budget Director and U.S. Trade Representative.

“One of the concerns I’ve had is that we continue to deepen our deficit for this year and therefore our debt over time by having another stimulus package before we even have the final checks going out under this stimulus package and see what some of the economic feedback is. I think it’s better to take our time, do the right thing and be sure we are addressing the key problems that we might see pop up this fall,” Portman said in an interview with Reuters.

Former House Speaker Newt Gingrich says economic issues will play an increasing role in the campaign for president between John McCain and Barack Obama.

“I think that Senator Obama is going to argue for bigger government, higher taxes and more regulation. I suspect that Senator McCain is going to argue for lower taxes, less regulation,” Gingrich said in an interview with Reuters.

“Senator Obama will argue that government bureaucracies can accomplish a lot of good things for the economy. Senator McCain will argue that entrepreneurs and small business are the key to the economy. And the country is going to have to choose which of those two solutions it thinks will work,” Gingrich said.

President John McCain would use his “maverick” status to strengthen the value of the dollar by bringing fiscal responsibility to the federal government, a top advisor to the Republican presidential candidate’s campaign said Thursday.

Tim Kane said the value of the dollar is based on psychology and convincing investors that the world’s largest economy will have a balanced budget.

“Why would people lose confidence in the US’ ability to pay its debts? Because they’ve lost confidence in the Congress’ ability to have a balanced budget,” Kane said in an interview with Reuters on the fourth day of the Republican National Convention.

“McCain is a different kind of animal. He really is a maverick and he is going to change that culture,” Kane said.

The dollar has lost roughly a third of its value since President George W. Bush took office.

Commerce Secretary Carlos Gutierrez tells Corbett B. Daly, Washington Bureau Chief of Thomson Reuters Markets, that the U.S. economy is “going through a difficult time, there is no question.”

The heat is on for hedge funds with commodities bets.

Earlier this week Ospraie Management told investors it is shutting its flagship fund after it plunged 27 percent in August. The fund’s energy and commodities stock positions fell as investors worried if a global economic slowdown will mean less demand for resources.

And now RAB Capital’s Philip Richards is giving up the CEO role to focus on his funds after an awful period of performance for his once high-flying Special Situations fund.

Losses on small-cap mining stocks, as well as its high-profile error in buying into troubled bank Northern Rock, meant its listed feeder fund fell 38.1 percent from the start of the year to Aug. 21.

One of the potential danger areas for hedge funds in this area is liquidity - how quickly they can dump stocks when investors decide enough is enough and want to pull their cash out.

The problem is that during the commodities boom of the last five years the flood of investor money has encouraged some funds to invest in less crowded areas such as smaller companies. These are easy to trade in a bull market but buyers can quickly disappear in a downturn.

Ospraie has told investors it will give investors their money back in stages, with the least liquid 20 percent taking up to three years to be returned.

Given the size of recent losses in this area, the illiquidity of some hedge funds’ positions and investors’ increasing nervousness as hedge funds continue to struggle, there are likely to be more such closures.

With emerging market stocks taking a beating, now would not seem to be an obvious time to launch new equity funds for the asset class. Benchmarker MSCI’s main emerging market stock index, after all, has lost more than a quarter of its value so far this year and concerns about the U.S. economic slowdown spreading are rife.

Despite this, U.S. investment manager Putnam says it is set to launch two new emerging market equity funds in October - one for U.S. investors, the other for Europeans. Is this perverse or prescient?

Putnam, of course, reckons it is the latter. During a chat with Reuters in London, Boston-based officials said the move reflected the long-term outlook for emerging markets which has not changed during the current market ructions. Growth projections for emerging economies remain far more attractive for equities than do those for developed markets, said Matthew Scales, a senior investment product manager.

His colleague, currency chief Parker King, went further. He said that despite a decade long slump in the 1990s in Japan, anyone investing there after World War II would still have made far more money than they would have in U.S. stocks. A lot of this, he said, was because of currency appreciation and that would happen in emerging economies too. “The mantra out there right now is just insane for emerging markets,” he said.

Merrill Lynch is giving a refresher course on Ten Markets Rules to Remember, created by Bob Farrell, the bank’s former dean of research during his tenure from 1957-2001.

Below are  the original rules:

#1: Markets tend to return to the mean over time
#2: Excess in one direction will lead to an opposite excess in the other direction
#3: There are no new eras, excesses are never permanent
#4: Exponentially rapidly rising or falling markets usually go further than you think, but they do not correct by going sideways
#5: The public buys the most at the top, the least at the bottom
#6: Fear and greed are stronger than long-term resolve
#7: Markets are strongest when they are broad, and weakest when they narrow to a handful of blue-chip names
#8: Bear markets have three stages: sharp down, reflexive rebound and a drawn-out fundamental downtrend
#9: When all experts and forecasts agree, something else is going to happen
#10: Bull markets are more fun than bear markets

So what does this mean today? 

David Rosenberg, Merrill’s North American economist  says: ”Rule #4 could be about the sliding U.S. dollar, as it now revives in mean-reverting fashion (back to Rule #1) .”  

Any other thoughts on offer?

Britain’s banks may have borrowed over 200 billion pounds from the Bank of England, four times the amount they were expected to take under an emergency liquidity scheme. It leaves them facing a sharp funding strain next month when the rug gets pulled away.

Alastair Ryan, analyst at UBS, reckons banks have taken over 200 billion pounds under the BoE’s Special Liquidity Scheme since it was offered in April. They had been expected to borrow about 50 billion pounds, although estimates were lifted to near 100 billion as wholesale markets stayed closed. The scheme allows banks to exchange hard-to-trade mortgage assets for government bills.

The problem is the BoE isn’t planning to extend the funding beyond a Oct. 20 deadline . If the borrowing from UK banks has been as high as Ryan estimates, it will have eased a short-term problem but shows how much the liquidity is needed. It also leaves even more medium and long-term funding that the banks will need to replace at some point.

European and U.S. central banks aren’t closing their funding windows. By shutting its window the BoE is pinning its hopes on securitisation markets re-opening, but that seems unlikely soon and could force banks to further shrink their mortgage books at a tough time for them and the housing market.

As the deadline looms, UK regulators, criticised for their handling of Northern Rock at the start of the credit crunch, will face mounting pressure to extend the scheme as confidence among UK banks clearly isn’t back yet.

It’s been three years since the International Association of Machinists and Aerospace Workers last agreed to a contract with Boeing, the end result of a strike at the aerospace company that lasted about a month.

Boeing said the 2005 strike caused it to deliver 29 fewer planes than expected that year, translating to about $2 billion in lower revenue.

Ahead of the long weekend, the IAM rejected Boeing’s “best and final”. Now the scenario is playing out for another confrontation, with one difference: Boeing’s popular 787 Dreamliner program has no more room for delays.

The first deliveries of the new, composite-built jetliner have been delayed three times, and is already about 15 months behind schedule.

Union negotiators have urged a vote for a strike on Wednesday - a simple majority is needed to reject the contract and a two-thirds majority is needed to OK a strike. The odds of a walkout are not as dire as they seem. Boeing “has too much at stake to allow a strike,” Credit Suisse analysts said Tuesday.

“Whereas one week ago we thought a strike was likely, we now believe one is unlikely,” Wachovia analysts said. That happier outlook was prompted, in part, by Boeing’s $2,500 first-vote ratification bonus offer. It’s payable only if the contract is approved by Wednesday. “Avoiding a work stoppage improves the chance (though hardly ensures) that another 787 delay could be avoided,” the analysts told clients.

Boeing, in an attempt to speak directly to union members, posted details of the final proposal online.