Corporate profits are a lagging indicator. They generally turn down after the economy does. While corporate profits will undoubtedly suffer as a result of the most recent economic weakness, the extent of the decline corporate profits will be the key.
Last night both Oracle and Adobe reported earnings. I was surprised that both companies profits and outlook were hardly effected by the recent weakness in the global economy. After all, the economic weakness has been ongoing for a few months. While this can still change, it is a positive for the bulls.
Since the last recession there was not much of an expansion and fewer excesses were built up at the corporate level, so corporate profits are not as vulnerable as they usually are heading into a recession. It will likely take a disaster scenario in order to have a severe effect on corporate profits and thereby the stock market. Unfortunately, a disaster scenario is not out of the question.