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The Odd Season: Good Earnings, Nervous CEOs

Why so serious, Corporate America?

The fourth quarter earnings cavalcade has arrived, with major companies like Google, IBM and Texas Instruments exceeding Wall Street's expectations. Still, many corporations are tempering their earnings beats with more than a dollop of caution about the outlook for 2013, which is barely 3 weeks old.

The pessimism underscores how, after four years of dark clouds stemming from the global financial pandemic, many executives are having a hard time buying into the idea of bluer skies. On Tuesday, the CEO of chemical company DuPont, Ellen Kullman, said the company was factoring in a "lower growth environment" despite the economic upturn.

(Read More: Economy Strong; 'Question Marks' Persist: DuPont CEO )

Yet investors certainly seem to be in a bullish mood, even if U.S. corporate chiefs are not. Major stock benchmarks are hovering near five year highs. Bespoke Investment Group pointed out in a research note that 398 of the stocks in the S&P 500 were trading at overbought levels. "This is an extreme reading, to say the least," the firm said.

(Read more: S&P 1,500: The Last Barrier Before a New Record ?)

In spite of the ebullient stock market, top U.S. executives are demonstrating little, if any, of the confidence that usually accompanies strong earnings reports and rallying share prices.

Jonathan Kitchen | Digital Kitchen | Getty Images

"CEOs around the country have become accustomed to two things: a sluggish employment trend and mediocre pace of growth. It's cast a pall over the economy," said Andrew Wilkinson, chief economic strategist at Miller Tabak and Co. "It's very difficult to get extremely bullish when the backdrop is relatively anemic."

Indeed, there are enough disappointments on the landscape to warrant some caution. Among the earnings season's disappointments, luxury retailer Coach saw holiday sales shrink as consumers pulled back on spending.Meanwhile, megabank Citigroup continues an uphill battle to pull itself out of its post-2008 slump.

In other words, most U.S. corporations are demonstrating a case of "once bitten, twice shy", particularly as policy stalemates in Washington that involve taxes and spending continue to hang like a Sword of Damocles over the economy. Many are still nervous about higher taxes, and the battle over hiking the debt ceiling remains a huge wild card.

Indeed, the International Monetary Fund warned on Wednesday that global growth for 2013 would still be a full percentage point lower than before the financial crisis. Like most of Corporate America, the fund went out of its way to delineate potential risks to the budding recovery.

"If crisis risks do not materialize and financial conditions continue to improve, global growth could be stronger than projected," the IMF's economic report said. "However, downside risks remain significant, including renewed setbacks in the euro area and risks of excessive near-term fiscal consolidation in the United States. Policy action must urgently address these risks."

Higher taxes in the U.S. would do more than just undercut corporate spending, economists say. Cash strapped consumers may already be pulling back on spending, particularly after payroll tax holiday expired at the beginning of the year.

Retailers like Coach and fast-food purveyors like McDonalds –which cautioned on its January sales even as it beat earnings expectations on Wednesday – would bear the brunt of lower consumer spending. The policy outlook is weighing heavily on the minds of most CEOs.

"There is an understanding of the disruptive capacity that politicians can exert," said Wilkinson, of Miller Tabak. After coming "close to the rails"with the debt ceiling and " fiscal cliff " battles, "I don't think they want to go there again. I don't see this as a lasting threat."

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