Daniel Wagner
and Christina Rexrode

WASHINGTON: It’s halftime for the season of corporate earnings reports, and investors are in desperate need of a locker-room pep talk.

Before Alcoa reported its third-quarter results Oct. 9, marking the unofficial start of the earnings season, financial analysts were predicting that profit and revenue for companies in the Standard & Poor’s 500 would be lower than the year before.

That would have been the first decline by either measure since the third quarter of 2009, just after the Great Recession ended.

But a funny thing happened on the way to the pity party: Some of the biggest and most important U.S. companies started reporting revenue growth and raising their guidance.

U.S. stock and bond markets closed Monday and today because of Hurricane Sandy.

It was the first time since 1888 that the New York Stock Exchange closed for two consecutive days because of bad weather. The cause then was a blizzard.

Areas around the Financial District were part of a mandatory evacuation zone.

As far as earnings reports that have already come in, the quarter was no blockbuster, to be sure, but by midweek analysts were reassessing their grim predictions. Halfway through earnings season, both winning streaks — profit and revenue — are on track to survive another quarter.

However, there are still plenty of reasons to worry about corporate America.

Sales are hurting because of weaker demand from Europe, which faces a recession, and China, where economic growth has slowed. A stronger dollar means sales overseas translate into lower revenue on the books back in the United States.

Above all, analysts worry about weaker revenue. Net income grew for 11 straight quarters partly because so many companies cut costs, borrowed money more cheaply and employed other short-term strategies to boost their profit margins.

In the fourth quarter of 2010, for example, net income for the S&P 500 leapt 37 percent, but revenue increased only 10 percent, according to S&P Capital IQ, a research firm.

That gap can’t survive, analysts say, and revenue growth is starting to weaken. Companies will need to beef up sales to keep increasing their earnings, and that takes stronger customer demand.

And yet: The winning streak appears likely to continue.

With stronger reports piling up at midweek, it appeared that S&P 500 earnings will increase 1.1 percent from last year, said Sam Stovall, chief equity strategist with S&P Capital IQ. Before earnings season started, his firm predicted a 2 percent decline.

At first, corporate reports appeared to be as bad as many feared.

Alcoa said China’s economic slowdown was reducing demand for its aluminum. Energy and commodity companies were similarly downbeat. Dow Chemical CEO Andrew Liveris announced layoffs and spending cuts, saying weak sales in China and Europe are contributing to a “slow-growth and volatile world.”

The Dow Jones industrial average plunged 243 points on Oct. 23, its third-biggest decline of 2012, after more comments about weak demand from DuPont, 3M, UPS and Xerox.