Why investors may ignore earnings this earnings season

The story this earnings season won’t be about falling corporate profits; it’ll be about recession fears.

The backdrop: Investors are looking for hints of an economic slowdown as companies begin reporting first quarter earnings. (Economists overwhelmingly predicted GDP growth would slow during the first 3 months of the year.)

Where it stands: As we’ve reported, the market isn't punishing companies as much as it typically does for less-than-stellar results.

• Analysts say earnings will fall 3.9% from their Q1 2018 level, yet the S&P has risen 13% in the year's first 3 months and more than 20% from its December low.

Why it matters: "Corporate profits have been the key driver of the stock market in the last 10 years," James Liu, founder of research firm Clearnomics, wrote in a recent note to clients. But the market has completely ignored predictions of declining earnings growth in the first quarter.

• There's been an acceptance that earnings growth was bound to decelerate this year after getting a boost from the tax cut in 2018.
• Profits aren't falling because of declining sales, but margins are shrinking thanks to higher labor and material costs.

The big picture: For first time in a decade, U.S. companies are expected to report lower profits, but also report higher revenue, Reuters reports.

Be smart: Nick Raich, founder of research firm Earnings Scout, tells CNBC "the market could be very sensitive to macro events like tariffs or slower global growth," rather than falling earnings.

• We've seen investors react to how companies are talking about a potential recession, for fear that signals — like the yield curve inversion, a potentially less-hot labor market and slowing growth around the world — are also showing up on executives' radars.

• One example: Shares of JP Morgan fell 1.7% when CFO Marianne Lake said that "recessionary indicators ... are not flashing red, but they are off the floor" in February, as Reuters points out.

What to watch: JP Morgan and Wells Fargo will field questions from analysts later this morning, after reporting earnings.

• In a press release alongside its earnings announcement, JP Morgan CEO Jamie Dimon reiterated his confidence in the economy, despite global geopolitical uncertainty.

Go deeper: Investors aren't punishing companies for bad guidance