US corporate earnings season has officially kicked off, and analysts are expecting nothing short of a spectacular rebound in companies’ first-quarter results. But the lofty outlook leaves little room for disappointment and could prove a stumbling block for US equity markets, which have been rallying to all-time highs off hopes for a swift economic recovery.As of April 9, Wall Street had pencilled in 24.5 per cent year-on-year earnings growth for companies in the blue-chip S&P 500 index. If those expectations are met, it would mark the strongest quarter since 2018. But because companies tend to beat estimates, researchers at FactSet think real earnings growth could be 28 per cent or more, the highest level in more than a decade.The forecasts represent a drastic upward revision from what Wall Street had originally anticipated. Back in December, during another explosion of coronavirus cases across the country, analysts predicted 15.8 per cent earnings growth.The accelerating national vaccination campaign and upbeat economic data support the case for a stronger rebound, but some investors warn that the rosy first-quarter expectations also could cause markets to trip.“If the optimism gets too high, even in a really good earnings season, the market could actually go down because there’s a lot fewer upside surprises,” said Randy Frederick, vice-president of trading and derivatives at Charles Schwab. “To me, that sounds like a climate that’s ripe for some sort of pullback.”Markets have been spoiled with dramatic upside surprises for three earnings seasons in a row. In last year’s second, third and fourth quarter, companies beat Wall Street estimates by more than 10 percentage points each time as pandemic damage proved less dramatic than feared, fuelling a fierce equity market rally.“You’ve had substantial earnings surprises back to back,” said Maneesh Deshpande, head of US equity strategy at Barclays. Now, with the bar significantly higher for markets to get their next dose of upside news, he said, “you could see some downside”.