By Caroline Valetkevitch

NEW YORK (Reuters] – The third quarter results from Corporate America will be available next week and investors are ready for more strong U.S. profit gains. Wall Street faces new issues as businesses continue to recover from the coronavirus epidemic.

A number of businesses have released downbeat outlooks as they approach earnings season. FedEx Corp (NYSE -) claimed that the labor shortages caused an increase in wage rates and overtime spending. Nike Inc (NYSE: ) blamed supply-chain problems and high freight costs for lowering its fiscal 2022 sales estimates and warning of delays in the holiday season.

Terry Sandven is chief equity strategist for U.S. Bank Wealth Management. “The pace and magnitude of growth are decelerating but still at a meaningful level,” he said. Due to the labor and product shortages as well inflationary pressures, “we will be watching to see how much demand there is, and what it means for the crucial holiday spending period.”

According to IBES data from Refinitiv, analysts see 29.6% increase year-over-year in company earnings in the third quarter. This is down from the 96.3% growth seen in the second quarter. It is slightly lower than the forecast for the third quarter a few weeks ago. This reverses the trend in estimations.

The third quarter earnings growth was expected to be lower than that of the second, which saw companies compare their year-ago results with the first.

“We had been moving at such high speeds. The positive revision momentum has ceased,” Nick Raich (CEO of The Earnings Scout), an independent research firm.

This week, earnings season kicks off with JPMorgan Chase (NYSE)

Here’s a graph on Analysts See Q3 U.S. Earnings Growth of 30%

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SUPPLY CHAINS, COSTS

After the recent rise in oil prices and crude oil prices, investors are now weighing the effects of higher energy costs for consumers and businesses. Higher energy prices are a good thing for producers but they can also be an inflationary threat for other businesses like airlines or other industries and reduce consumer spending.

U.S. corporations have maintained record profits this year due to the fact that they have reduced costs and passed high prices onto customers. Many investors want to know how long this trend can last.

The market is still wobbly following a volatile September and weak third-quarter earnings. The S&P 500 in September registered its biggest monthly percentage drop since the onset of the pandemic in March 2020. The index also saw its first monthly drop since January.

Analysts remain skeptical as to how much the price is.

COVID-related supply chains issues are spreading beyond consumer goods. And longer-term signs of global friction are easy to find,” Savita Subramanian, head of U.S. equity & quantitative strategy at BofA Securities, wrote in a note on Friday. These issues, however, are not fully priced in stocks.

Morgan Stanley According to analysts at the NYSE, consensus earnings projections have not taken into account the constraints in the supply chain for businesses. It is now much more difficult for companies than in previous quarters to beat estimates.

According to them, “Consumer discretionary businesses of all types are in the crosshairs supply shortages as well higher logistics costs and labor costs.” These strategists believe the equity market is set for a larger pullback and that third quarter earnings will determine the depth of the stock market’s decline.