US stocks reeling from the impact of high bond yields are facing a new threat from an expected slew of profit warnings, triggered by fading US consumer spending trends.

Concerned that Americans might be pulling back, 80% of 567 respondents in the Bloomberg Markets Live Pulse survey said that some sectors are likely to caution about earning trends when they report quarterly results. This will weaken the S&P 500 Index, already under pressure after Hamas’ surprise attack on Israel made investors shun risky assets.

“The consumer space will be tough going into this quarter,” said Stephanie Niven, a London-based portfolio manager at investment firm Ninety One. “We’re beginning to feel that there may be some challenges and that’s combined with the Fed hiking cycle beginning to filter through.”

Companies across the US, from used-car dealers to retailers, are already starting to see slowing demand. And strategists like Morgan Stanley’s Michael Wilson are warning about consumer stocks, which have outperformed the broader market so far in 2023, as shoppers are expected to wind down spending. US discretionary stocks have fallen for a third straight week.

Investors are concerned that higher interest rates will start seriously weighing on the economy and eat into profits that are just starting to recover from the steepest slump since the pandemic. A surprising surge in nonfarm payrolls last month increased expectations that the Federal Reserve will raise interest rates again before the end of the year.

Indeed, elevated rates remain top of mind with about 54% of MLIV Pulse respondents saying the biggest negative factor during earnings period will be rising bond yields and the impact of further tightening in financial conditions. Yields on 10-year Treasuries neared 4.9% immediately after the jobs report while the 30-year bond rose above 5% — both touching the highest since 2007. The median of survey responses shows that 10-year yield is expected to end the year around 4.82%.

On top of the risk from elevated borrowing costs and a weaker consumer, earnings expectations for S&P 500 companies over the next 12 months are near record highs. About 60% of participants see the upcoming results pushing the S&P 500 lower. Nearly 37% expect the gauge to end the year 5% to 10% lower from current levels, and 8% see it sliding even more.

More than a fourth of respondents identified themselves as portfolio managers, while about 100 said they were traders. Other pollees included individual investors, economists, and researchers.

For now, the worst of the slump in S&P 500 earnings-per-share is expected to have passed, with analysts forecasting this season to show a near 1% drop from a year ago after profits contracted about 5% in the second quarter, according to data compiled by Bloomberg Intelligence.

“The earnings cycle appears to be passing a near-term trough, a lagged response to last year’s inflation peak, though a growth catalyst remains elusive and the late summer surge in oil prices threatens to upend the recovery path,” strategists Gina Martin Adams and Michael Casper wrote in a note.

Moreover, strikes from the film to the automotive and health care industries also weigh on sentiment. More than 40% said the broad conclusion from the union strikes at US automakers is that they reflect the tight US job market, something which will fade as the economy softens. The strike also underscores how wages are not catching up to inflation. They highlight the imbalance “in compensation growth between workers and highly paid executives,” one Pulse survey respondent said.

Yet, for all the headwinds, more than 40% expect this season to show how resilient the economy has been. The first test of that sentiment will be when JPMorgan Chase & Co. kicks off the earnings season in earnest on Oct. 13 and peers follow as banks provide a glimpse into the health of the economy.

“Investors are expecting the third quarter to be a savior, but we think it will be a tough one,” said Aneeka Gupta, director of macroeconomic research at WisdomTree. “Markets are embracing what the Fed is saying, but then also looking at the forward-looking implications that something would have to break now that they seem so adamant to keep rates high for longer.”

The MLIV Pulse survey of Bloomberg News readers on the terminal and online is conducted weekly by Bloomberg’s Markets Live team, which also runs the MLIV blog. This week, the survey asks about trade wars and statecraft. Who’s been the winner of the US-China trade war so far? Share your views here.

(Updates with S&P 500 in second graph, video, link to full results lower down.)