There has been a divergence on Wall Street. As stocks have approached new highs, expectations for company profits have darkened considerably.



Now, with corporate America starting to report first-quarter earnings, stock investors will find out if they ought to restrain their enthusiasm.

During the first three months of the year, Wall Street analysts slashed their forecasts for S&P 500 companies’ first-quarter earnings by 7.2 percent, according to the data provider FactSet.

The forecasts typically fall as the quarter progresses and analysts get a better sense of how the businesses are performing. But the decline during the first quarter was more than double the typical drop, and the largest cut to earnings estimates during a quarter since the start of 2016.

The analysts tracked by FactSet now expect companies in the S&P 500 as a whole to report that profits fell 4.2 percent from a year earlier. It’s a reflection of the slowing global economy, rising costs related to tariffs and wages, and the fact that tax cuts last year, which lifted growth substantially, are now baked in.