The already soft earnings quarter now ending has come with even weaker projections for the next quarter — and could be signaling that still-rosy projections for the longer range are unlikely to materialize.
With about 85 percent of the Standard & Poor's 500 companies reporting, the results haven't been pretty: Just 51 percent have exceeded net profit expectations, with only 40 percent or so beating on revenue.
But those are backward-looking numbers.
What's even scarier is that more than 50 percent of the companies on the broad index have lowered their estimates for the third quarter, while only 21 percent have raised. Analysts have followed in kind, cutting their forecasts for S&P 1500 companies on about a 3 to 1 ratio.
Though the ratio of negative-to-positive revisions has eased a bit in the past couple of weeks, that's primarily because earnings seasonis coming to a close.
"Most have already said their peace and confessed," said Nick Raich, senior vice president and director of research at Key Private Bank in Cleveland. "How much further can analysts cut at this point without waiting for more company guidance that we're not going to get for another couple of weeks?"
The momentum from corporate America clearly seems to be waning.
Near-recessionconditions in Europe coupled with a high jobless rate, rising dollar and threat of a fiscal meltdown at the end of the year in the U.S. are curtailing business activity and dimming growth expectations.
After annualized earnings grew at a 6 percent clip in the second quarter — slightly better than expected, but flat when excluding financials — economists project little to slightly negative profit growth in the third quarter.
But they've been sticking to 11 percent growth in the fourth quarter and 12 percent in 2013, projections that are "well above our estimates and likely unachievable," Savita Subramanian, equity and quant strategist at Bank of America Merrill Lynch, said in a research note.
"We think the downward revision cycle has further room to run, and management guidance has similarly gotten more cautious with twice as many companies now guiding down as up," she said.
"We have plenty of downside risks that I don't think are fully priced into the market."
The current quarter, in fact, is the worst in terms of beating bottom-line expectations since the first quarter of 2009, a three-year run that has seen the U.S. financial crisis end only to be replaced by fears of a debt meltdown in Europe.
In the meantime, companies are reluctant to spend as the U.S. faces its own debt problems as well as the so-called fiscal cliff, a barrage of spending cuts and tax increases which comes into play at the end of the year if Congress fails to hit deficit-reduction goals.
Technology, energy and materials have the highest negative revision ratios, while telecoms and utilities are the only S&P 500 sectors with more positive than negative changes from analysts, according to Bespoke Investment Group.
So with those elements in play, what makes analysts think companies will return to such robust growth later this year?
"Hope," Raich said. "It's hard to be overly bullish or bearish. None of these government initiatives...have led to sustainable growth because none of these programs has addressed the solvency issues, as opposed to just pumping liquidity in."
Still, bullish strategists are counting on some improvement in economic signs — particularly the 163,000 new nonfarm jobsthe Bureau of Labor Statistics reported Friday — as hope that the dour outlook for earnings can ease.
"We realize that investors remain concerned the downturn recently could be a precursor to a potential 'slide into recession' and it is therefore critical for U.S. economic data to improve in its overall cadence," Thomas J. Lee, chief market strategist at JPMorgan, told clients. "But, again, we think investors need to appreciate the powerful dynamic that improving construction (replacing manufacturing as the U.S. driver) coupled with lower oil represents to the U.S. economy."
Indeed, despite the moribund quarter earnings the stock market has not been deterred, rising about 4 percent since Alcoa reported on July 9.
The gains have occurred in peaks and valleys, though, suggesting a fragile rally that could quickly turn around if the profit outlook continues to dim.
"The economy is in a slow growth mode. The stock market is, I think, maybe at best correctly priced for that kind of environment," David Resler, chief economist at Nomura Securities in New York, told CNBC's "Squawk Box." "We have plenty of downside risks that I don't think are fully priced into the market."