The dominoes are still falling in the stock market, and pain isn't fully priced in as earnings outlooks get slashed at the fastest pace since 2009, RBC strategist says

• The dominoes are still falling in the stock market as earnings outlooks get cut at the fastest rate since 2009, a RBC strategist said. 
• Lori Calvasina said that earnings outlooks were being revised at their fastest past since 2009, when the economy was recovering from recession.
• Other analysts have warned of an earnings recession to come in the first half of the year, tanking stocks by 20% or more.

The dominoes are still falling in the stock market, and the pain hasn't been fully priced in as earnings outlooks slashed at the fastest pace since 2009, according to RBC strategist Lori Calvasina.

"The word that jumps to mind is 'dominoes,'" Calvasina said in an interview with CNBC on Tuesday. "This idea that we've priced in all the earnings pain in the broad market uniformly doesn't make a lot of sense to me. I think it's been priced in one domino after another."

Calvasina believes that some dominoes in the market have already fallen, pointing to the plunge in tech and growth stocks as firms reported downbeat earnings in 2022.

But not all sectors have had their share of revisions yet, as more resilient parts of the market last year, like energy stocks, are now beginning to buckle as firms revise earnings estimates downward.

"They've got to take their lumps right now. We've got to get some of those numbers down," Calvasina said, predicting more earnings pain to come as the rest of the dominoes fall. Downwards earnings revisions are now coming in at their fastest pace since 2009, she added, when the economy was still reeling from the Great Recession.

That mirrors the view of other Wall Street analysts, who have warned that an earnings recession will strike in early 2023 as firms continue to grapple with high inflation and aggressive monetary policy. Morgan Stanley's top stock strategist Mike Wilson estimated that earnings figures were still about 20% too high, and stocks could plunge as companies give lower guidance in 2023. He urged investors not to buy into the current rally, calling it a "head fake" in the final stage of the bear market.

The S&P 500 fell 20% last year as investors reacted to tightening financial conditions and began to price in some upcoming pain in 2023. There may also be other headwinds that haven't been priced yet into the market, Calvasina warned, such as profit margin contraction, the effects of negative GDP growth, and companies struggling with debt burdens as interest rates rise.

She predicted the S&P 500 would climb about 2% to 4100 by year-end, ending the year mostly flat. That's in line with the views of other Wall Street analysts, who have warned stocks will drop 20%-25% in the first half of the year before ending 2023 flat.