"A lot of companies mentioned the strong dollar in their [fourth-quarter] reports," Butters said. "Those with more domestic exposure are doing much better on earnings than companies with global operations."
The deteriorating earnings outlook hasn't scared investors to the sidelines yet, but it is troubling. All 10 sectors of the S&P 500 are expected to have lower earnings growth this quarter, and seven are expected to have profits decline. With the Fed raising interest rates for the first time in almost 10 years and the business cycle getting more challenging for companies, financial results could become a lot more important for stock prices in the coming year.
"Earnings are always important, but in the later stages of bull markets, they can be critical," said Scott Clemons, chief investment strategist for Brown Brothers Harriman. "When the Fed takes away the punch bowl, earnings are the next driver for the market."