Continuing worries about escalating oil prices, coupled with higher interest rates, kept the market skittish for most of March. Market jitters are likely to continue well into the earnings season. With first quarter earning reports for 2005 on the horizon, the beginning of April signals the start of "earnings pre-announcements" - forecasts from public companies on whether they will meet, exceed, or fall short of their quarterly earnings estimates.

Companies are much more likely to issue pre-earnings announcements when they have disappointing news to impart - conventional wisdom being to get the bad news out fast. For this reason, analysts, and equity holders alike, who are trying to get a "read" on first quarter earnings prospects overall, await these notices with some understandable trepidation.

Earnings expectations are generally low. The stock market has drifted mostly downwards in the first quarter - by the end of March, the Dow Jones industrial average was down some 3.2 percent, and the Nasdaq was off some 8.5 percent for the year. We've seen record crude oil prices, plus a weakening dollar in 2005, and the Federal Reserve has raised short-term interest rates seven times in the last 10 months. Each of these factors, taken individually, can spell trouble for many companies and their shareholders. Higher interest rates - because they affect all business segments across the board - tend to make the market especially nervous because profits usually decline when the cost of corporate borrowing increases.

The consensus is that earnings growth is slowing. Current forecasts for the first quarter indicate that earnings for the S&P 500 are expected to grow 7.8 percent—down from a whopping 27.5 percent growth rate in the same period in 2004. The more bearish investment experts stress that soaring profits at energy companies in the first three months of 2005 will inflate the first quarter numbers for the S&P 500, and that, without their contribution, the growth rate would be only about 4 percent. Most Wall Street commentators acknowledge that a slow-down of some type was only to be expected, because profits in 2004 soared in comparison to 2003.

Slowing Productivity Growth
Analysts are also paying attention to job and labor productivity statistics. Concerns about the lackluster job market have lingered for a long time, but dwindling productivity growth is a new concern for Wall Street. January's employment numbers from the Bureau of Labor were not reassuring, with only 146,000 jobs created. The U.S. economy needs 150,000 new jobs a month just to keep up with new entrants into the labor market.

Slowing productivity rates are a more recent issue, and the market reacted fearfully to Federal Reserve Chairman Greenspan's hint that diminishing productivity growth could spur higher inflation. Economists suggest that the slow-down pattern is a normal feature of where we are in the economic cycle, and that the drop in growth during the second half of 2004 is no cause for immediate concern. They note that productivity increases in 2002 and 2003 were extraordinarily high, and that growth in 2004 - which averaged 4.1 percent - almost doubled the average for the previous 20 years.

Earnings news and other pending economic data make April a month for review and analysis for many investors, as investment experts hunt for indications of positive news from market leaders and ponder the outlook for the second quarter.