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

U.S. sanctions Chinese officials over Uighur human rights abuses

Photo: Xinhua/Liu Jie via Getty Images

The Treasury Department announced Thursday that the U.S. has sanctioned four Chinese Communist Party officials and the Xinjiang Public Security Bureau for human rights abuses against Uighur Muslims and other ethnic minorities in Xinjiang.

Why it matters: The sanctions designations, pursuant to the Global Magnitsky Act passed by Congress in 2016, mark a significant escalation in the Trump administration's response to the Chinese government's detainment of over 1 million Uighurs in internment camps.

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Coronavirus dashboard

Illustration: Aïda Amer/Axios

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  2. U.S.: Total confirmed cases as of 2 p.m. ET: 3,081,383 — Total deaths: 132,570 — Total recoveries: 953,420 — Total tested: 37,431,666Map.
  3. Public health: Cases rise in 33 statesFlorida reports highest single-day coronavirus death toll since pandemic began.
  4. Science: World Health Organization acknowledges airborne transmission of coronavirus.
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China's extraterritorial threat

Illustration: Aïda Amer/Axios

All multinational companies and executives need to worry about breaking U.S. law, no matter where they're based or doing business. Now, they need to worry about Chinese law, too.

Why it matters: The projection of U.S. norms and laws around the world has been an integral (and much resented) part of America's "soft power" since 1945. As China positions itself to replace the USA as global hegemon, expect it to become increasingly assertive along similar lines.