Associated Press

Associated Press

NEW YORK

Tumult in China triggered the worst opening week for U.S. stocks in history, and this week, investors could get plenty more to worry about.

Profits are expected to drop at U.S. companies.

Again.

Earnings for companies in the Standard and Poor’s 500 index are forecast to drop for the second-straight quarter, a rare occurrence outside a recession. Despite a rebounding jobs market, the U.S. did not grow fast enough to boost profits, and once-surging developing economies that helped lift foreign sales dramatically slowed.

All this would be worrisome enough at any time, but investors are particularly jittery now. U.S. stocks are expensive by some measures, even after slipping in 2015 and falling sharply in the first week of the year. That leaves little room for more disappointing news.

One widely respected gauge, the so-called Shiller earnings ratio, is flashing warning signs. Named after Nobel Prize winner Robert Shiller of Yale, the ratio compares the price of stocks to annual earnings averaged over 10 years. The measure is now 25, much higher – meaning more expensive – than the long term average of 18.

Companies begin reporting their results for the October-December quarter today. Earnings per share for the companies in S&P 500 is expected to have dropped 5.5 percent compared with a year earlier, according to S&P Capital IQ, a research firm. That follows a 1.4 percent drop in the July-September quarter. Revenues are forecast to fall for a fourth-consecutive quarter.

This wasn’t supposed to happen.

A year ago, the average view of financial analysts who follow the stock market said earnings for the October-December quarter would jump 12 percent, and urged investors to buy accordingly.

Analysts on Wall Street are a notoriously bullish bunch, but you can almost understand their enthusiasm. Since the financial crisis, U.S. companies have managed to squeeze profits out of a slow-growing domestic economy. They slashed costs, often through massive layoffs, and restructured their businesses to operate faster and smarter.

They also were helped by surging sales abroad, super-low borrowing rates thanks to Federal Reserve policy, and a controversial maneuver: Companies bought trillions of dollars of their own shares to take them off the market.