By Caroline Valetkevitch

NEW YORK (Reuters), U.S. businesses will report on their final quarter in 2021. This is because investors are concerned about inflation and the Federal Reserve’s ability to expedite the pace of interest rate rises.

These worries, together with the caution associated to COVID-19 Omicron’s rapid-spreading variant, have led to a recent market sale-off. It was led by Nasdaq as well shares of technology companies and large growth firms that have been able to take advantage of low interest rates.

Based on IBES data by Refinitiv, year-over–year profit growth is predicted to be lower for the fourth quarter of 2020 than in the first three quarters in 2021. But it will still remain strong at 22.4%.

The economic rebound in the first stages of pandemic caused huge profits to be made in 2021.

Bill Northey from U.S. Bank Wealth Management, said that it is “nearing to the end of very easy comparisons which we had in 2020.” These easy comparisons are going to diminish as we get into 2022.

Last year’s strong market performance – with the S&P 500 gaining 26.9% for the year – was on the back of massive profit growth, so corporate outlooks for 2022 will be key this earnings period, Northey said.

Earnings growth for all of 2021 is estimated at about 50% compared with 8.6% for 2022, while the forward price-to-earnings ratio for the S&P 500 was last at 21.7, compared with its long-term average of 15.5, according to Refinitiv DataStream.

JPMorgan Chase (NYSE) reports Friday. The reporting period will begin with Citigroup (NYSE: Wells Fargo (NYSE:).

As the focus shifts towards rate rise expectations, bank shares are gaining ground as they align with U.S. Treasury yields heading into earnings season.

Due to rising Treasury yields and new lending, analysts expect large U.S. banks will show an increase of core revenue in the fourth quarter.

Both the S&P 500 bank index and financial index hit record highs last week. The minutes from last week’s Fed December meeting show that some Fed policymakers are keen to tighten their policies even more quickly.

Investors will be looking for signs that supply chain bottlenecks are decreasing, as inflation is one of their biggest concerns. Some hope has been offered by the U.S. economic report.

The U.S. service industry report last week showed tentative signs that the supply blockade is beginning to ease.

Companies have had to pay more for transportation delays at ports or other locations, and consumers are paying more.

Retailers are particularly affected by bottlenecks. Investors will monitor how this affects holiday sales.

S&P 500 companies have been maintaining record profit margins, with many able to pass on higher expenses to customers, but that may not continue.

“We expect margins not to be a record this quarter” but still high, said Howard Silverblatt, senior index analyst at S&P Dow Jones Indices in New York.

Investors have been shifting away from technology-intensive growth stocks to invest in more value-oriented shares that perform better when there is a higher interest rate environment. However, investors are expressing concern that Wall Street is not expecting better technology company results.

The results of big tech and other megacap companies will be available next week. Netflix (NASDAQ: ) should report its findings on January 20.

According to Daniel Morgan, Synovus Trust’s portfolio manager in Atlanta, Georgia, recent results were positive from Micron Technology (NASDAQ 🙂 and other chip companies, he said.

He stated, “That gives us confidence that we will get positive reports from the chip sector.” “I’m optimistic.”

According to Refinitiv data, industrials and energy will see the greatest year-overyear earnings growth in the fourth-quarter.

Energy has been by far the strongest S&P 500 sector performer in early 2022, with the S&P 500 energy index up about 14% since Dec. 31, supported by tight supply, following a whopping 48% gain in 2021.

ExxonMobil (NYSE): Results Chevron The (NYSE: ) reports are expected in the next few weeks.

But all 11 of the S&P 500 sectors are slated to show profit growth for the fourth quarter of 2021, while revenue growth for the period is seen at 12.1%. Based on data from Refinitiv, this growth rate would be even lower than the previous quarters.