Earnings season can be so refreshing.

Companies that do better than people think see their stock go up. Companies that do worse go down. Fast growers get rich valuations, slow growers don't and negative growers talk about how the weather or currency problems or the bad kohlrabi crop in Big Rapids hurt business.

As luck would have it, it looks like the earnings season that is going to kick off in the coming week will be a good one. If they meet

First Call

consensus estimates,

S&P 500

companies' earnings should grow by about 6%. Since analysts' forecasts generally tend to the conservative as earnings near, and since companies generally guide the analysts a little lower than what they think they'll make (helping to generate the beloved upside surprise), earnings should grow a little better than that -- about 8% or 9%, guesses First Call director of research

Chuck Hill

. (

TSC

runs a

calendar of earnings expectations for S&P companies thoughout earnings season.)

There are other positive signs as well. In the confession period that precedes earnings season, not nearly as many S&P 500 companies warned they wouldn't hit their number as in recent quarters. The pace of downward revisions by analysts ahead of earnings has also been slower.

But for all these expectations of strength, it will be hard to convince Wall Street that it's about to see a good reporting period when it clambers into the office Monday.

Compaq

(CPQ)

has seen to that. The largest personal-computer maker warned Friday that it expects to earn just 15 cents per share in the first quarter -- 16 cents below the First Call consensus estimate.

Come Monday morning, there will be plenty of sympathy pains in the tech sector. Compaq says it faced pricing pressure and increased competition; what about other PC makers? What's that do to

Intel

(INTC) - Get Report

? How about the drive makers? Techs are going to get beat with an ugly stick.

Eventually, the market will get over it. Other companies in the sector will come out and say that business is fine or that business is not fine. Investors will look at a chart of Compaq, see that its stock is at the same place that it was in August 1997 and wonder whether Compaq's problem isn't pricing or competition or that kohlrabi crop, but Compaq itself.

Despite Compaq's shortfall, the fact remains that quarterly earnings look pretty good.

And the fact remains that earnings look pretty good. Marshall Acuff, portfolio strategist at

Salomon Smith Barney

, thinks that that should help keep the running higher. Given the strength of the economy, he particularly looks for strength in sectors with strong ties to domestic demand. "Retailers, homebuilders -- those kinds of companies should do well because that's where the strength in the economy is coming from," he said.

But there is potential trouble here. The economy is strong and that is driving earnings higher. Lovely. But then there is that thing besides earnings that drives stock prices: interest rates. And therein lies the problem. "The key question that is lurking out there is, can you get a sustained reacceleration of the profit cycle without reinflation?" said Rich Bernstein, chief quantitative strategist at

Merrill Lynch

. "I think that's the 10-cent question and personally, I don't think you can."

"Everybody wants to be a new-paradigmer now," continued Bernstein, who counts himself among those who first embraced the idea that there had been a big shift in the economic environment. "However, our whole theory of the new paradigm was that over time in a disinflationary environment profits would evaporate. The problem is everyone wants to be new paradigm, but everybody also wants to have earnings reaccelerate. That's not new paradigm. That's paradise."

Bernstein suspects that the disinflationary trend will continue and that the bump in first-quarter earnings is going to be the exception rather than the rule going forward. To him, that suggests that the narrow market is going to get narrower -- it's an economic environment wherein only the companies that are really executing are going to be able to continue to show good earnings. And he thinks the alternative -- good growth and better earnings -- is no better. Then the

Fed

takes away the punch bowl and the end comes to the cycle.

Steve Roach,

Morgan Stanley Dean Witter's

chief economist, suspects that the economy

will

start to heat up a bit. "This is the fourth year in a row where the economy is growing much faster than expected," he said. "The question for us and the Fed and the bond market is, 'Can you keep growing at 4% to 5% without having any consequences toward inflation?' My guess is the old script has not been torn up. I think that the Fed will have to tighten before the party's over, but that tightening continues to look increasingly distant."

But Roach is unconvinced that this will damage the stock market badly. While he believes that "the days of drawing sustenance from the bond market are over for stock investors," he also notes that stocks have held up well so far this year despite a backup in bond yields. "That's one of the most impressive things about this stock market," said Roach.