This U.S. earnings season the data from the frontline is about to confirm the broader economic narrative: Things aren’t so great.

How that plays out in financial markets and whether we begin to see meaningful contagion is perhaps the more interesting question.

U.S. companies have begun their quarterly ritual of reporting earnings, and though we are early in the process, already the themes may be emerging: lower revenues, profit margins under pressure and a fondness among companies to blame the strong dollar or weakness abroad in places like China.

Less than 10 percent of U.S. companies have yet reported, but according to data from earnings tracker FactSet the majority of companies citing a negative factor on calls discussing earnings with investors cited the stronger dollar, with a substantial minority blaming weakness in Europe or China.

“As global growth decelerates, corporate earnings growth should decelerate,” Stephen Jen of hedge fund firm SLJ Macro Partners wrote in a note to clients.

“We will likely see unimpressive micro data (corporate earnings) to confirm the troubled macro narrative of the world.  The ‘bad-news-is-good-news’ dynamics will not likely last much longer.”

That idea, that poor news could be good for markets for risky securities like equities, is based on the idea that weakness makes it more likely that the Federal Reserve waits longer to hike interest rates, or makes other attempts to ameliorate the economy.

Aluminum company Alcoa hit all of the expected blue notes with its earnings release last week, reporting a double-digit decline in sales, combined with issues caused by dollar strength and a huge increase in production by competing Chinese firms.

Firms in general look vulnerable to regression back towards more historically typical levels both of profits and margins. With S&P 500 profits at record highs, a failure to expand top-line sales or any type of wage pressure are almost sure to compress profit margins.

As well, while years of corporate share buybacks flatter earnings per share figures, they often have served to mask weakening in firms’ underlying franchise, or a reluctance to invest in new markets or products.

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