This earnings season will be a formidable test for the market, which appeared to anticipate a "business-as-usual" economic recovery with a 39% run-up in stock prices off the March 9 low. General Electric (NYSE:GE) -- by its size, breadth, and exposure to credit markets -- offered up some big clues this morning with its results. My assessment: very sobering.

Hit … and a miss
For example, although GE beat analysts' earnings-per-share estimate by a penny, it missed the top-line (revenue) estimate by 7%. All operating units experienced a year-on-year revenue decline (the best performance was turned in by Energy Infrastructure, which was almost flat at (1%)). The total backlog in equipment and services has remained static since 2008, despite a 42% drop in equipment orders during the quarter.

The big question mark though, as far as I'm concerned, remains GE's lending arm, GE Capital. For example, GE Capital values its real-estate assets on an accrual basis instead of using market prices; that is entirely proper, but it may well understate potential losses.

Compare that to Goldman Sachs (NYSE:GS): Despite announcing record second-quarter earnings, the bank has marked its $6.4 billion commercial real estate loans at just over $0.50 on the dollar. Meanwhile, JPMorgan Chase (NYSE:JPM) CEO Jamie Dimon said this week that he expects the U.S. commercial real estate market "will get worse over the next several quarters." Bank of America (NYSE:BAC) and Citigroup (NYSE:C) are reporting today, which will give us more reference points.

My assessment for GE shares … and the market
At 15 times the low estimate for 2009 earnings per share and 1.3 times book value, GE's shares are at multiyear lows (prior to the fourth quarter of 2008) and may yet produce excellent returns … but there is too much uncertainty here for me to be interested. There is simply no need to ponder GE's value at length when there are less complex businesses out there at attractive prices.

As for the market as a whole, I think GE's earnings inject another dose of realism, adding to evidence (the deterioration of GE competitor CIT Group (NYSE:CIT), declining inflation in the U.K., etc.) that the so-called "green shoots" were simply an aberration. As such, I think it is entirely possible that we could witness a significant correction (-20% or worse) before the end of the year, perhaps even re-testing the March low. 

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Alex Dumortier, CFA, has no beneficial interest in any of the companies mentioned in this article. Try any of our Foolish newsletters today, free for 30 days. The Motley Fool has a disclosure policy.