Oct. 4--If the stock market's bulls are to have anything more than a brief romp, companies will have to start making money pretty soon.

To be specific, their earnings will have to start going up instead of down. When the companies in the Standard and Poor's 500 tally their results for this year's third quarter, analysts expect to see a 25 percent profit drop. It would be the ninth straight quarter of falling earnings, the longest such streak since Thomson Reuters began keeping track in 1998.

This recession has been hard on corporate America's bottom line. Banks are writing off bad loans. Consumer products companies say the consumer isn't buying. Energy companies have been hurt by lower oil prices.

Despite this bad news, the stock market has gone on a tear. The SandP 500 is up 52 percent from its March 9 low. The Nasdaq Composite Index is up 61.5 percent.

Investors obviously are looking forward, not backward. They think the red ink in quarterly reports will soon be replaced with eye-popping gains. According to Bloomberg, analysts expect SandP 500 profits to rise 26 percent next year.

That may not be unrealistic. Profits in last year's fourth quarter and this year's first quarter were depressed by the gigantic bank writeoffs, so beating those numbers shouldn't be hard.

It also may not be enough to keep stock prices rising.

Mark Keller, chief investment officer at Confluence Investment Management in Webster Groves, says investors have already priced in a strong profit rebound. One measure of that: The SandP 500 is trading at 17 times this year's profit estimate, which is slightly above the long-term average.

"It's an oxymoron; you can't expect an upside surprise, but that's what's happening," Keller said. "It may be that we're going to see some real good earnings, better than expected, but the market will not necessarily go up."

David Rolfe, chief investment officer at Wedgewood Partners in Ladue, also thinks the market may have gotten ahead of itself. "Even if earnings do come in higher relative to expectations, I think we sell off from here," he said.

If companies really thought things were improving fast, Rolfe says, they'd be hiring. The government reported Friday that the U.S. lost 263,000 jobs in September, so clearly that isn't happening.

The bull market could continue if companies not only beat the estimates for next year, but continue to raise their earnings guidance for future years. Sustainable growth, however, would require better numbers on the top line -- revenue -- as well as the bottom one.

Companies that have surpassed earnings estimates in recent quarters have done so mainly by cutting costs.

"At some point, businesses have to show that they're actually selling something, because they can only cut so far," says Ken Crawford, a managing director at Argent Capital Management in Clayton.

There is room for an upside surprise, Crawford notes. An uptick in merger activity, including recent acquisitions by Abbott Laboratories, Cisco Systems and Xerox, may presage even more cost-cutting, while creating a way for the buyers to show that all-important revenue growth.

There's a downside, too, however. Most of the time, analysts tend to be too optimistic when they look several quarters into the future. They lower their estimates as more data come in.

If that happens next year, it will be because banks still aren't lending, consumers aren't spending and factories aren't humming. In all likelihood, such a dose of bad earnings news would be enough to put this year's bulls out to pasture.

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