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Illustration: Aïda Amer/Axios

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

Go deeper

Off the Rails

Episode 7: Trump turns on Pence

Photo illustration: Eniola Odetunde/Axios. Photos: Elijah Nouvelage, Alex Wong/Getty Images

Beginning on election night 2020 and continuing through his final days in office, Donald Trump unraveled and dragged America with him, to the point that his followers sacked the U.S. Capitol with two weeks left in his term. Axios takes you inside the collapse of a president with a special series.

Episode 7: Trump turns on Pence. Trump believes the vice president can solve all his problems by simply refusing to certify the Electoral College results. It's a simple test of loyalty: Trump or the U.S. Constitution.

"The end is coming, Donald."

The male voice in the TV ad boomed through the White House residence during "Fox & Friends" commercial breaks. Over and over and over. "The end is coming, Donald. ... On Jan. 6, Mike Pence will put the nail in your political coffin."

Big Tech's post-riot reckoning

Photo illustration: Sarah Grillo/Axios. Photo: Tasos Katopodis/Getty Images

The Capitol insurrection means the anti-tech talk in Washington is more likely to lead to action, since it's ever clearer that the attack was planned, at least in part, on social media.

Why it matters: The big platforms may have hoped they'd move to D.C.'s back burner, with the Hill focused on the Biden agenda and the pandemic out of control. But now, there'll be no escaping harsh scrutiny.

29 mins ago - Technology

Why domestic terrorists are so hard to police online

Illustration: Eniola Odetunde/Axios

Domestic terrorism has proven to be more difficult for Big Tech companies to police online than foreign terrorism.

The big picture: That's largely because the politics are harder. There's more unity around the need to go after foreign extremists than domestic ones — and less danger of overreaching and provoking a backlash.