NEW YORK -- Coming soon to Wall Street: a key quarterly exam on corporate profits that could determine if the stock market's recovery will fizzle or morph into a sustainable bull run.

On the eve of the second-quarter earnings-reporting season, investors are bracing to see if the early bets they made on an economic rebound -- which jump-started a 40% stock rally -- will be reflected in upcoming earnings reports and companies' commentary about the future.

How much money companies made and how they made it will offer the first true snapshot of whether the so-called green-shoots-recovery theory translated into better business conditions and bigger-than-expected earnings. "The market is trying to figure out what the recovery is going to look like," says John Derrick, director of research at U.S. Global Investors. "Investors got encouraged. Now we are in a show-me stage."

Analysts expect earnings in the April-June quarter to fall 34.5%, the eighth quarter in a row of negative growth, Thomson Reuters says. All 10 Standard & Poor's 500 index sectors are on track for an earnings drop from a year earlier -- the most sectors forecasting lower earnings since Thomson started tracking in 1998.

But the number of companies issuing profit warnings vs. those with positive pre-announcements has shrunk noticeably in the second quarter vs. the January-March quarter, Thomson Reuters says. There were only 1.6 warnings for every positive plug in the second quarter, vs. 4.6 warnings for each positive in the first three months of the year.

Key questions include:

*Is the economic recovery for real? Investors want to see the green shoots turn to flowers, not weeds, confirming their belief in a second-half rebound. "The key catalyst for stocks is any signs that point to a meaningful recovery," says John Bollinger of Bollinger Capital Management. Cost-cutting helped firms beat expectations last quarter. Now the profits must come from revenue gains to confirm the recovery is not a fluke.

*Are consumers showing signs of life? Signs of spending at retailers, even at discount-sale prices, would signal improved consumer confidence. "The key is to make sure the consumer is not in a coma," says Edward Yardeni of Yardeni Research.

*Is the guidance upbeat? "Companies can't lower the bar," says Jeff Kleintop, strategist at LPL Financial. They "must meet or raise guidance. They have to say more than, 'Things are not as bad as the end of the world.' " (c) Copyright 2009 USA TODAY, a division of Gannett Co. Inc.

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