Wall Street scales earnings expectation way back

After months of downward revisions, analysts now expect the S&P 500 to post a year-over-year earnings decline in the first quarter, according to FactSet.

State of play: As recently as Sept. 30, analysts predicted the earnings growth rate for the current quarter would hit 6.7%. If their estimates prove to be true, it would be the first year-over-year contraction of S&P earnings since the second quarter of 2016.

Yes, but: Companies are up against a high bar, thanks to a boost from corporate tax cuts last year.

• Still, CEO warnings about a global economic slowdown, the trade war and margin pressures has led analysts to curb expectations.
• Earnings growth in the fourth quarter is on track to hit 12%, with about 46% of S&P 500 companies having released quarterly results so far.

The bad news: As more companies release soft guidance, expectations for first quarter earnings — and the rest of the year — may only get bleaker.

• "We wouldn't be surprised if every quarter this year ends up in negative territory,” analysts at Morgan Stanley wrote in a recent note.