Stock should keep going higher even with earnings headwinds
Third-quarter earnings should be fairly strong, even though overall growth could look pretty washed out, thanks to hurricanes Harvey, Irma and Maria.

The storms have done their damage to economic data, and now we'll see the impact on the profits of a good many S&P 500 companies, with the first big wave of third-quarter earnings in the coming week.

For most, the damage, will be slight like the 3 percentage points to earnings reported by from natural disasters — or the 2 cents per share hit to fiscal first-quarter earnings from Hurricane Harvey. The airline sector is likely to see a bigger hit, with the "$120 million headwind" reported by Delta Air Lines from lost income. But for the insurers, as a group, the impact has been huge, evidenced by a recent round of estimate cuts for the sector to account for catastrophic losses.

The insurance industry's estimated earnings decline is so big in fact, that it knocked several percentage points off of earnings growth for the S&P 500, estimated by Thomson Reuters to be running at 4.4 percent. Without insurers, that growth would be 7.1 percent, still well below the more than 12 percent growth of the last quarter.

Insurers reporting in the coming week include Tuesday's report from , which saw a 35 percent reduction in its earnings estimate, and Travelers on Thursday, with its estimate cut 32 percent, according to Factset.

Analysts expect earnings to be an overall positive for the stock market, which was quiet in the past week but continued its upward trajectory to new highs.

"I'm really befuddled. This is not a tape that I've been kind of supportive of, but the market has done fine. We're entering a seasonally good time of year. It's hard to argue against the tape at year-end," said strategist Thomas Lee, co-founder of Fundstrat in a phone interview.

Lee, in a later appearance Friday on CNBC, said he became less cautious about stocks.

"We basically got steamrolled. We don't want to be bearish," he said, noting earnings should be good and there's a positive impact on the market from . "This week we noticed that high yield finally confirmed the rally in equities. High yield was widening since March and this week just made a new low which means we're synchronized with equities."

Companies reporting in the week ahead include Netflix on Monday; Johnson & Johnson, IBM, Goldman Sachs and UnitedHealth on Tuesday; United Continental and Abbott Labs on Wednesday; Verizon and Blackstone on Thursday, and GE, Procter & Gamble and Honeywell on Friday.

Big banks Citigroup, Wells Fargo and JPMorgan have already reported. According to Thomson Reuters, the financial sector earnings growth would be 6.1 percent if not for the drag from insurers. Including the insurance companies, financial sector earnings are expected to decline by 8.6 percent, with the insurers down 65 percent.

According to John Butters, senior earnings analyst at Factset, the biggest hits from the hurricanes and Mexican earthquake were felt by five companies — , , and with a $4 billion reduction in forecasts as of last week.

Butters said the insurers are by far the worst hit, but already with just 28 of the S&P reporting as of Thursday, he saw mentions of hurricane impact from 13 of those companies. That included Darden, Carnival, Costco and Fastenal, which he notes specifically said hurricanes hitting the Gulf Coast and Puerto Rico "shaved 20 basis points to 30 basis points from revenue during the quarter."

Energy sector earnings are expected to be the strongest, with growth of 140 percent, followed by technology, with 12 percent growth, according to Thomson Reuters. Utilities profits are expected to be down 2.7 percent and telecom earnings are estimated to decline 1.2 percent. If the energy sector was excluded, S&P 500 earnings would be up just 2.3 percent, according to Thomson Reuters.

Economic reports in the coming week should also show the impact of hurricanes.

There's industrial production for September on Tuesday, housing starts Wednesday and existing home sales for September on Friday.