Intel, DuPont, Apple Computer, Invensys, Xerox. All these companies, and many more, have issued profit warnings over the last couple of months, putting the skids under global equity markets and technology stocks in particular.

The change in market sentiment has been swift. The latest Merrill Lynch survey of US fund managers found that pessimists about corporate profits now outnumber optimists by 23 percentage points, compared with a 12 point majority for the optimists in both August and September. UK fund managers now have an unfavourable profit outlook for the first time since March 1999.

In the short term the sudden gloom looks hasty. After all, most analysts still expect both US and European companies to produce annual percentage profits growth that is well into double digits.

According to IBES, the information firm, 70 per cent of US earnings pre-announcements have so far been negative. But that compares with historic norms of around 80 per cent. Despite the spate of warnings, IBES thinks that third quarter year-on-year US earnings growth can still reach 18-19 per cent.

So why, if the overall picture looks so rosy, are investors so concerned? Ian Scott, equity strategist at Lehman Brothers, points out that it is the trend in earnings expectations that affects sentiment. "In June, earnings upgrades exceeded downgrades by about 5 per cent," he says. "Now the two are in balance."

One sector in particular has seen forecasts dented. Investors in the telecommunications sector, a market darling in late 1999 and early 200O, have woken up to the potential cost of developing the third generation of mobile phones.

But telecoms aside, the most significant factor in prompting the change in investor outlook has been a slowdown in the pace of global economic growth. By itself, slower economic growth would dent the ability of companies to increase sales, and therefore profits. But companies have also been blaming their problems on a combination of high oil prices and the weak euro.

Higher oil prices were not something that the markets worried about at the beginning of the year. After all, how much oil does Microsoft use? But there are some industrial companies where oil remains a significant part of costs. And higher oil prices are in effect a tax on consumers; to the extent that consumers will have more to spend on oil, they will have less to spend on everything else.

For US companies, the weak euro/strong dollar situation makes their exports less competitive while it also reduces the dollar value of the profits of their European subsidiaries.

The recent concern about earnings and profit prospects has revived the debate about the market's long-term profits expectations. According to Lehman Brothers, forecasts of long-term annual earnings growth are currently running at 15 per cent in Europe and 18.5 per cent in the US. That compares with likely nominal gross domestic product growth of 5-7 per cent.

The implication is that corporate profits are set to take an increasing share of GDP, at the expense of labour. That might be possible in Europe, where unemployment is still high, but is it likely in the US? Unemployment is already at a 30-year low of 3.9 per cent and non-financial corporate profits have claimed a higher proportion of GDP during the last four years than at any time since the 1970s.

Sceptics point out that corporate profits have had the benefit of a following wind during the 1990s from lower interest rates, a trend that is unlikely to be repeated over the next decade.

In recent years, many companies have increased their earnings per share by the simple expedient of buying back their own shares.

One criticism of US accounting methods is that the cost of granting share options to executives and employees is not taken as a charge against profits. Indeed, US companies actually get a tax credit every time an employee exercises an option, which boosts their after-tax earnings. In some cases, this credit is a significant part of their tax bill.

So the clatter of falling share prices may simply represent the sound of chickens coming home to roost. Investors had begun to extrapolate into infinity the strong profits growth of the last few years which may, in any case, have had the benefit of artificial stimulants.

Profits for the rest of 2000 may still be very healthy. But investors are now starting to ask: what about the second half of 2001? Or 2002?