(Bloomberg) -- Now that Corporate America’s earnings season is nearing an end, the takeaway is clear: A two-year run of swelling profits is over. 

With the bulk of quarterly reports in, the per-share earnings of the companies in the S&P 500 Index were down 2.3% during the last three months of 2022, the first decline since the third quarter of 2020, according to data compiled by Bloomberg Intelligence.

Also notable: While most companies were still able to beat analysts’ forecasts, the share of those delivering negative surprises rose to the highest since the onset of the coronavirus pandemic. And profit margins are shrinking, squeezed by inflation and an economic outlook that’s eroded the ability to pass on costs by raising prices.

The reports have underscored the wide disconnect between the weakening fundamentals and a stock market that’s rallied for much of this year on speculation that the Federal Reserve may be able to slow inflation without derailing the economy.

That focus on what’s ahead led stock investors to largely ignore disappointing results from some of the market’s biggest companies — such as Apple Inc. and Alphabet Inc. — while piling into stocks that topped expectations like DuPont de Nemours Inc.

“The lagged impacts of tighter monetary policy and fiscal policy are driving slowing sales growth, but we’re also looking past it to some extent,” said Brad Neuman, director of market strategy at Alger. “To be successful in near-term investing you have to be investing in companies that are going to have fundamental resilience in a difficult earnings environment.”

Here’s some of the key things we learned from fourth-quarter results:

Tech Earnings Misses

The biggest technology companies are feeling the effects of slowing demand and a weaker digital-advertising market. Collectively, Meta Platforms Inc., Apple, Amazon.com Inc., Microsoft Corp., and Alphabet missed consensus earnings estimates by 8%, according to Bank of America Corp. strategist Savita Subramanian, who attributed it to economic shifts now that the last of the pandemic-era stimulus is “firmly behind us.”

Even so, most of the big tech stocks have rallied amid rising expectations for a soft economic landing, optimism on China’s reopening, and an investor rotation back into stocks that were hit the hardest last year.

Job Cuts Bolster Stock Bulls

While the job market has remained surprisingly resilient in the face of the Fed’s rate hikes, many companies are moving rapidly to cut their workforces in anticipation of a deeper slowdown. Among them were Meta, Zoom Video Communications Inc. and Walt Disney Co., which saw their stocks gain on the cost-cutting.

“That’s what investors have been clamoring for and there’s no better example than Meta,” said Alger’s Neuman. “Companies are listening to investors after a year-plus of investors saying they need to stop spending and that they prefer to invest in companies that have more near-term profits.”

However, not all job cuts were well received as companies including News Corp., Dell Technologies Inc., and Match Group Inc. stumbled on the news with sales underwhelming.

Economic Slowdown Is Showing Up

The shakeout from the Fed’s steadfast efforts to tame inflation showed up across earnings. Apple, for example, reported its worst holiday results in years as consumers around the world slowed their spending on things like mobile devices and computers.

Overall, sales growth for the S&P 500 companies slowed to 4.5% during the last three months of the year, less than half the pace of the previous three months and the slowest since the end of 2020, data compiled by BI show. Companies from Whirlpool Corp. to Tyson Foods Inc. said that while the fallout from higher inflation and increased interest rates will impact expectations over the coming months, things will improve in the back-half of the year.

Margin Pressures Linger

Margins have remained under pressure across industries with companies forced to grapple with a tight labor supply and waning pricing power. Among non-financial firms, adjusted operating margins fell to 14.3%, the lowest quarterly margin in two years, down from 14.9% in the third quarter, according to Wells Fargo.

Overall, operating margins topped expectations by the least in more than a year with the majority of S&P 500 firms falling short, BI data show. Even with a flurry of job cuts across big tech, weaker demand paired with negative operating leverage suggest “more margin pressure ahead,” according to BofA’s Subramanian.

Elsewhere in Corporate Earnings:

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