Companies in the S&P 500 are expected to report first-quarter profits grew 9.1 percent, compared with the same quarter a year earlier, according to FactSet. If that holds up, it would be best quarter since the end of 2011 and a third straight quarter of earnings growth.
After five straight quarters of declining profits, a brightening earnings outlook comes at a welcome time. Still, there are reasons to be cautious. The biggest contributor to elevated first-quarter earnings forecasts is the energy sector, which is expected to earn $7.7 billion. A year ago, this group lost $1.5 billion. Exclude the group, and Factset forecasts S&P 500 earnings rose just 5.2 percent.
Also, while a rebound in oil prices is now lifting earnings, a resurgence in U.S. shale-oil production has investors increasingly worried. The price of crude oil has dropped 11 percent this month. Another prolonged slump in the price of oil could once again weigh on earnings.