Earnings, economy, Europe, election worry investors

NEW YORK -- Forget summer break. This is a perfect time for investors to take a quick pop quiz.

Which headwind is most to blame for the stock market's six-session losing streak? The choices:

A) Earnings.

B) Europe.

C) Economy.

D) Elections.

E) All of the above.

The answer? E.

It's not just one thing hurting stocks. The "Four Es" are injecting enough doubt into investors' minds to drag the Dow Jones industrials down 371 points, or 2.9%, in the past six sessions.

In short, U.S. earnings are slowing down, the U.S. economy has hit a soft patch, debt-ridden Europe is a mess, and the November elections could determine if the U.S. economy tumbles off the "fiscal cliff" — a toxic combination of higher taxes and spending cuts.

"In the near term," says John Praveen, a global strategist at Prudential Financial, "all of these Es are going to be headwinds."

The CliffsNotes version of why:

•Earnings. Robust profit growth has been the pillar of the stock market recovery since the financial crisis ended. But after 10 consecutive quarters of positive growth, analysts and CEOs are slashing profit projections. S&P 500 company profits are on track to fall 2.2% in the second quarter, the worst quarterly performance in three years, S&P Capital IQ says.

"Downward earnings revisions have picked up, and we expect that to continue, and that will hold back a sustainable rally," says Emily Jones, equity analyst at Strategas Research Partners.

•Economy. The sluggish U.S. economy is slowing even more. With job growth stalling and manufacturing falling in June, second-quarter GDP growth has been cut to 1.5% from 2.5%, Praveen says. The soft patch will mean weaker earnings. More worrisome: It's not just Europe that's weak. "The fact Europe is weak is an old story," Praveen says. "The new story is the U.S. economy is struggling."

•Europe. Risks linger, despite a Greek election outcome that kept them in the eurozone and a bailout for debt-strapped Spain, says Nicholas Sargen, chief investment officer at Fort Washington Investment Advisors: "This cloud will hang over us for a long time."

•Election. Partisan politics has investors worried that lawmakers won't compromise, causing a crisis. "The coming election," Praveen says, "will determine if we avoid or fall off the fiscal cliff."