Corporate profits

For corporate profits, is it as good as it gets?

1. Peak gains: American corporate profits are growing at breakneck speed.

A perfect storm of huge corporate tax cuts, strong economic momentum and rising oil prices are expected to push S&P 500 earnings up nearly 20% this year.

Businesses haven’t minted money so quickly since 2010, the first full year after the Great Recession, according to FactSet.

Stocks hit new highs in January as investors anticipated skyrocketing growth this year. But Wall Street is increasingly concerned that growth will not be sustainable. Profits, the main driver of stock prices, may continue to rise, but it will likely be at a slower pace.

“The rate of earnings growth this year is as good as it gets, especially at the end of an economic expansion,” Ed Yardeni, president of investment advisory firm Yardeni Research, wrote to clients.

Wall Street analysts are forecasting a sharp deceleration in earnings growth – to around 10% – next year. And this assuming that the economic recovery, already the second longest in history, continues to accelerate.

Concern over slower earnings growth has led to a sharp wake-up in the markets after many companies reported impressive results. Stocks of IBM (IBM) and caterpillar (CAT) and Alphabet (GOOGL), the owner of Google, it all fell after companies beat Wall Street earnings expectations.

Caterpillar shares began to fall after CFO Brad Halverson said first quarter earnings would be the “high point of the year.”

On average, S&P 500 companies that beat both revenue and profit expectations traded just 0.1% higher on the day they released their results, according to CFRA Research. “Even companies that advertised perfect quarters” often fell on the same day, wrote CFRA’s Lindsey Bell.

The successful earnings season has so far failed to move the needle of the entire stock market. The S&P 500 has been stable over the past two weeks and roughly unchanged over the year. The Dow Jones is down almost 2% in 2018.

Related: Rising Costs Are Starting To Take A Toll On US Businesses

The good news is that more subdued earnings growth doesn’t need to doom the nine-year equity bull market.

Although a “slowdown in earnings growth will occur next year,” Michael Wilson, equity strategist at Morgan Stanley, says it has already been “onboarded.” This is because the once high stock valuations have returned to earth. In other words, investors no longer price perfectly.

The catch is that the economy has to keep growing.

Bill Dudley, the outgoing chairman of the New York Federal Reserve, said on Friday he would be “surprised” if the recovery from the Great Recession ended in a year or two.

Still, Dudley warned that there were “some clouds on the horizon,” including the risk of a trade war.

“If we take the wrong path,” Dudley said of the trade, “it would obviously create quite a bit of risk.”

Of course, a real trade war would make worries about maximum profit growth strange.

2. Inflation monitoring: The Labor Department is expected to release the consumer price index and the producer price index for April this week. These indices keep track of how much consumers pay for goods and how much producers sell them.

When the CPI unexpectedly surged in January, it raised fears that the Federal Reserve was accelerating interest rate hikes to keep inflation low. But the measures have flattened since then, and the April jobs report found a modest 2.6% increase in wages, which should allay inflation fears.

Still, some analysts expect wages to rise in the coming months. And inflation is approaching the Fed’s 2% target. Wall Street is therefore sure to keep a watchful eye on the price indices.

Related: The US Economy Grows Modest to Start 2018

3. Job rotation: The government plans to release its job vacancies report on Tuesday in March, days after another strong jobs report.

The unemployment rate fell to 3.9% in April, the first time it has fallen below 4% since 2000. The number of people leaving life is also historically high, as people move on to better jobs.

The good news came with a caveat: the unemployment rate has gone down in part because the labor force has shrunk. Tuesday’s report will offer more details on the types of changes people made in March.

Related: Unemployment Below 4% For First Time Since 2000

4. Disney’s super wins: Disney (SAY) will have the opportunity to brag about “Black Panther” when releasing second quarter results on Tuesday.

The hugely popular superhero film grossed over $ 688 million domestically. That puts it ahead of “Titanic” on the list of all-time highest grossing movies. Disney’s “Avengers: Infinity War” and the upcoming “Star Wars” movie “Solo” are also set to be huge hits.

Investors will also be listening to updates on Disney’s plan to buy most of the 21st century fox (FOX), which is due to report on Wednesday.

Related: Disney’s Battle Plan: ‘Avengers: Infinity War’ Comes Off Screen

5. Apple soars: So much for investor fears about weak iPhone sales. Apple (AAPL) just had its best week in years.

The company climbed 13%, its best since October 2011. Shareholders applauded the news that Apple will spend an additional $ 100 billion on share buybacks. It bought back $ 22.8 billion of its own stock in the first three months of this year, a record.

And that of Warren Buffett Berkshire Hathaway (BRKA) bought about 75 million Apple shares in the first three months of the year. “It’s an amazing business,” Buffett told CNBC.

Related: Dow Climbs 332 Points As Apple, Jobs Reports Increase In Inventories

6. Coming this week:

On Monday – AMC (AMC) earnings

Tuesday – Disney, Sturm Ruger (RGR) earnings; SHOCKS

Wednesday – 21st Century Fox revenues; IPP

Thusday – CPI

Friday – University of Michigan Consumer Sentiment Survey

CNNMoney (New York) First published on May 6, 2018: 7:52 a.m. ET