‘Make-or-break’ time for Wall St.

Bracing for life on the downward slope as earnings reports roll in.

Crunch time is coming NEW YORK — to Wall Street. Analysts are calling it the “make-or-break quarter.”

Throughout this gilded year for investors, growth has kept accelerating for all kinds of forces that boost stock prices, sending the S&P 500 to more than 40 records. Now, though, investors are preparing for life on the downward slope of the mountain.

The economy is still growing, but at a slower pace. The same is likely to become true soon for support from the Federal Reserve. But the crunch of a post-peak world will become most quickly apparent in coming weeks as companies report how much profit they made during the summer.

Analysts are looking for S&P 500 companies to report earnings per share nearly 28% higher for July through September than a year earlier.

That would be the third-fastest earnings growth since 2010.

But it would also mark a sharp slowdown from the second quarter’s 90.9% profit surge, when the economy was exploding out of the coronavirus shutdowns.

“We’re beginning to decelerate right at the time that monetary and fiscal policy support may be waning,” said Rich Weiss, chief investment officer at American Century Investments.

Crucially, that deceleration is happening just as strong corporate profit growth is becoming a more important support for stock prices.

A stock’s price generally rises because the company is making more in profit or investors are willing to pay more for each $1 of those profits. Lately, that second possible reason has been going in reverse as longer-term interest rates rise.

The yield on the 10-year Treasury note has climbed to roughly 1.60% from about 0.75% a year ago and from 1.20% three months ago.

Stubbornly high inflation has been one reason, along with expectations that the Fed will soon announce a paring back of its bond-buying program.

When interest rates are rising and super-safe bonds are paying more in interest, investors feel less need to pay such high prices for stocks.

They’re now paying about $20.60 for each $1 in earnings per share expected from S&P 500 companies in the coming 12 months. That’s down from a price tag that topped $24 a little more than a year ago.

For stock prices to keep rising past their recent peaks, or even just to maintain their current levels, strong corporate earnings growth will have to do more of the lifting.