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feel sorry for

Chevron

Sure, the second-largest U.S. oil major earned $13.4 billion during the first nine months of 2006, almost matching its 12-month total for the prior year. Sure, the CEO pulled down almost $9 million last year (admittedly a modest sum by the standards of the industry and of our times.)

But even energy titans need a shoulder to cry on now and then. With much of North America and Europe sweating through the warmest heating season since the days of the Mayflower, and in some cases since Charlemagne, this is one of those times.

Crude prices have begun to roll over. Natural gas costs half as much as it did a year back. Meanwhile, those refineries aren't getting any younger, and costs are up across the board. So while refining margins are well ahead of 2005, they're down considerably from the springtime ethanol supply scare.

On Wednesday, Chevron felt compelled to warn that the earnings it will report on Feb. 2 will be "adversely affected" by such handicaps. Chevron's predicament is indicative of the broader trend. In the fifth year of the longest-running profit boom in at least the last half-century, the only thing investors want to know is, "What have you done for me lately?"

Lately, the S&P 500 companies have increased their fourth-quarter profits by 9.7%, based on analyst estimates compiled by Thomson Financial. The growth pace is half of what it was in the third quarter, checked by reversals of fortune for the energy suppliers and utilities, as well as more red ink at Ford. Energy earnings are expected to decline for the first time in four years, having more than quadrupled over that span. Earnings for the S&P 500 excluding its energy components are expected to rise more than 13%, according to Thomson.

On the other hand, without financials, profit growth would slow to a chilly 2.6%. The largest market sector's expected 34% bottom-line increase is a consolation prize of sorts for weathering Katrina and Rita. Insurers are facing easy comparisons after the heavy losses caused by the hurricanes, even as they pocket sharply higher premiums. Meanwhile, investment banks have chipped in record-breaking advisory fees and hefty trading profits.

Only the materials sector can hope to get as much bang for its buck, and, with its own energy costs cut, it just might, if the results reported by Alcoa this week are any indication. Industrials, staples and telecoms will play supporting roles, though, of the three, only industrials are likely to manage a growth rate in the teens.

Analysts expect technology stocks to deliver market-leading earnings this year, but the techs will be conspicuous no-shows at the Q4 party. They're expected to post a year-over-year gain of just 1%, hurt by Motorola's warning and delays of Microsoft's new Vista operating system, which won't spur PC sales for another month.

Despite the tempering of expectations by the likes of Chevron, Motorola and Sprint, the preannouncement season has not been especially ominous, though also not as trouble-free as in the recent past. The pace of warnings is in line with the historical average. "At this point, no red flags are popping up, besides the fact that we have seen the growth rate come down a little bit, but not to a level that would raise concerns at this point," says Thomson research analyst John Butters.

He's referring to slippage in the overall growth consensus from 10% on New Year's Day to 9.7% now. That's not too shabby for an economy currently thought to be growing at an annual pace of 2% or so. The bigger issue is the additional slippage expected in the coming year, with earnings growth expected to bottom out below 7% this summer. If that slips closer to zero in the coming months, the market could be in for a hard time.

Then again, the busy pace of share buybacks will likely cushion any slowdown. According to Standard and Poor's, the 12-month yield on the S&P 500 in terms of dividends and buybacks stood at 5.4% at the end of September. In terms of price per earnings, the index is about as cheap as it's been since the start of 1996 and back then, it rallied 57% over the next 24 months.

Meanwhile, the S&P 600 small caps are expected to post earnings growth of just 3% in the current quarter, limiting their annual growth rate to 14%. They're expected to boost the bottom line another 12% during the coming year. That index's price-to-earnings ratio is down to 19, from more than 23 three years ago.