Nice quarter. Too bad about the guidance.

As fourth-quarter earnings roll in, a disturbing pattern is emerging: A company beats Wall Street's estimates, but unveils a tepid forecast that cuts the knees out from under its stock. Given how earnings growth is slowing, investors had better get used to it.

Last week, it was Apple that got squashed. The iPod maker trounced sales and profit estimates for its fiscal first quarter, but its second-quarter guidance came in below expectations. Result: The stock sank 6 per cent last Thursday, and hasn't stopped dropping since. Shares of IBM and Intel have also fallen victim to disappointing forecasts.

It isn't just techs that are testing investors' patience. Yesterday, U.S. diversified industrial manufacturer Eaton Corp. posted fourth-quarter profit, before items, of $1.66 (U.S.) a share, beating Wall Street's $1.59 average estimate. The world's second-biggest maker of hydraulic equipment also boosted its quarterly dividend by 10 per cent and announced a buyback of up to 10 million shares.

All terrific news, except that Eaton projected flat revenue for 2007 and warned that profit could fall, partly because of a slowdown in demand for heavy-duty truck parts. Investors wasted no time hammering the stock, which slumped 5 per cent for the biggest decline on the S&P 500.

Investors can count on more disappointments as fourth-quarter earnings season progresses, given that the days of double-digit earnings growth look to be coming to an end. According to Thomson Financial's "blended growth rate" - a projection based on actual earnings for companies that have reported and estimates for those that have not - earnings are expected to increase 9.3 per cent in the fourth quarter. That would break a string of 13 consecutive quarters in which earnings have risen by 10 per cent or more.

No reason to panic, some analysts say.

"We're going to see companies continue to earn money, but at a slower pace," said Art Hogan, chief market strategist at Jefferies & Co. in Boston. "Investors need to get their minds wrapped around what normal is, because we haven't had normal in a couple of years. We've had abnormally good earnings and a lot of that's driven by favourable interest rates and excess liquidity in the system."

What, exactly, is normal? According to Mr. Hogan, it's earnings growth of about 7 per cent on the S&P 500. It turns out that's close to the 8.5-per-cent gain analysts project for calendar 2007 - a number that could well come down if more companies issue disappointing forecasts.

Judging by the slide in stocks yesterday, investors are convinced they haven't seen the last of the profit warnings. The Dow Jones industrial average suffered its biggest drop since late November, falling 88.37 points or 0.7 per cent to 12,477.16 - its fourth consecutive decline.

Other market barometers also finished in the red, with the S&P 500 off 7.55 points to 1,422.95 and the Nasdaq composite index down 20.24 at 2,431.07. Motorola helped extend the selloff in tech land, as shares of the mobile phone maker slumped 2.8 per cent after Piper Jaffray said the company's margins could get squeezed by competitors.

Canadian stocks also fell as worries about corporate earnings and economic growth weighed on investor sentiment. The benchmark S&P/TSX composite index slipped 13.22 points to 12,705.77, with financials, utilities, materials, industrials and consumer stocks all contributing to the loss.