As the U.S. earnings season begins in earnest and investors get their first look this year at the health of corporate America, some early signs confirm fears of a slowdown in profits growth.

Alcoa Inc. (AA), the world's biggest aluminum producer, and biotechnology company Genentech Inc. on Monday reported lower-than-expected fourth-quarter earnings.

The same day, chip maker Advanced Micro Devices Inc. (AMD) warned that its fourth-quarter revenue would fall below Wall Street's expectations.

Analysts have warned that higher costs for companies in raw materials, energy and wages, coupled with higher interest rates, could slow profit growth further in 2005.

Also, pre-announcements from companies in the technology and consumer cyclical sectors have cited decreased demand, pricing pressures and increased inventories as the primary reasons for their lowered outlooks.

While fourth-quarter 2004 earnings overall are expected to grow 15.5 percent year-over-year for companies in the Standard & Poor's 500 index (search), most sectors in the index will lag that rate of profit growth considerably, according to Reuters Estimates.

For the whole of 2005, Reuters Estimates expects earnings growth of 10.6 percent, about half the rate it estimates for 2004.

"Overall, earnings should come in above historical trends — but that is within the context of an overall slowing in earnings from their peak a few quarters ago to single-digit growth in 2005," said Michael Sheldon, chief market strategist at New York brokerage Spencer Clarke.

Reuters Estimates' fourth-quarter 2004 earnings growth expectation of 15.5 percent for the S&P 500 overall is boosted hugely by the strong expectations for the basic materials and energy sectors, which have benefited from global demand.

Basic materials and energy are expected to show 67 percent and 66 percent fourth-quarter earnings growth respectively.

However, the telecommunications services and utilities sectors are expected to show the weakest fourth-quarter earnings growth, with a 1 percent decline and 5 percent rise respectively.

Earnings growth among technology companies will slow to 15 percent in the fourth quarter compared to 38 per cent in the third quarter, and the industrial sector will see its profit growth slow to 14 percent from 22 percent, according to Reuters Estimates.

"I have maintained for the past four quarters that you saw the peak of the economic momentum in the third and fourth quarter of 2003," said Jeffrey Saut, chief investment strategist at Raymond James Financial.

"And if you believe as I do that there is at least some correlation between economic momentum and earnings momentum then I have argued you also saw the peak of the earnings momentum in the third and fourth quarter of 2003."

A major concern for profits in 2005 is that debt-heavy U.S. consumers finally run out of spending power.

Spencer Clarke's Sheldon said consumer spending — which makes up about two-thirds of U.S. gross domestic product — is likely to slow because consumer debt is at a record high.

Saut shared this concern, but added: "Never underestimate the American public's ability to spend money, even if they don't have it."