Traders work on the floor at the New York Stock Exchange, March 22, 2019. Brendan McDermid | Reuters

Morgan Stanley is calling for a full-blown earnings recession, while many other analysts see one negative quarter and a return to positive profit growth by the second quarter. Michael Wilson, Morgan Stanley's chief U.S. equity strategist, says he's looking for two or more quarters of negative or flat growth, meeting the technical definition of a recession. Wilson, in a note, says first-quarter earnings could be better than the forecast 4% decline in profits because of the propensity of companies to beat estimates. But he added that in the fourth quarter, companies beat at a lower-than-normal rate of just 3 percent even though earnings estimates had come down significantly ahead of the reports.

"In other words, a lowered bar into the quarter does not mean the likelihood of a beat is greater. The forecasts for 1Q19 have been lowered substantially and we do not think we are going to see a beat big enough to lift index growth into positive territory," he wrote. The ratio of companies offering negative guidance compared with those forecasting positive results is the highest since the first quarter of 2016, the last year with quarters of negative earnings growth. At 3.3 times, the ratio is also above the average since 2005, supporting the view that companies should have "lackluster" beats this quarter. "This is where the rubber will meet the road for stocks. We're comfortable saying that the stock market is well aware of the weaker earnings growth expected this quarter. However, the real question at this point is what the second half of the year will look like," Wilson noted. Source: Morgan Stanley While Morgan Stanley expects continued negative growth, Credit Suisse strategists Monday said they expect to see an earnings recession avoided, and Bank of America Merrill Lynch analysts also expect earnings to beat the consensus and turn positive after an absolutely flat first quarter. Bank of America Merrill Lynch analysts did reduce their S&P earnings forecast for the year Monday to growth of 4%, from an earlier forecast of 5%. The analysts forecast a 4% gain for the second quarter, and flattish again in the third quarter with an increase of just 1%.