Can flat earnings really support a rising market?

Call it the pancake effect.

With the first half of S&P 500 companies having reported second-quarter earnings, profits are now slated to rise by just 0.8 percent compared with the second quarter of 2014, according to Thomson Reuters. That’s a blended number that combines the earnings that have already reported with analyst expectation for those companies yet to report. (For reference, FactSet’s blended number currently calls for a second-quarter earnings decline of 1.2 percent.)

That is significantly better than the 3 percent earnings decline that was expected when earnings season began. But the question remains: Is this nearly flat growth good enough to support a stock market that has risen more than 7 percent since the end of Q2 last year?

Some are skeptical, especially given the prospect that the Federal Reserve may be preparing to raise its key federal funds rate target this year.

“There are a lot of companies that are struggling, so overall we’re heading to a rate increase, but underlying economic strength within earnings isn’t quite there where it should be,” said Larry McDonald, head of U.S. strategy with Societe Generale.

However, it is important to factor the major drag of energy earnings into the overall growth numbers. Thanks to the plunge in oil prices, S&P 500 energy company earnings are slated to fall by about 50 percent, dragging down the overall growth number by several percentage points.

When energy is excluded, earnings growth looks “pretty good, all things considered, as this is not the usual economic recovery into economic expansion,” Oppenheimer chief market strategist John Stoltzfus wrote to CNBC.

And since “ultimately cheaper oil prices will be good for the U.S. economy (business, government and consumers),” Stoltzfus doesn’t worry about the signal that flat earnings might otherwise be sending.

Adam Jeffery | CNBC IHOP celebrates the 10th anniversay of National Pancake Day at CNBC Headquarters in Englewood Cliffs, New Jersey.

Adam Jeffery | CNBC
IHOP celebrates the 10th anniversay of National Pancake Day at CNBC Headquarters in Englewood Cliffs, New Jersey.

“Earnings are flat as a pancake, but IHOP stock is up, so I guess people do like pancakes,” quipped Boris Schlossberg of BK Asset Management, referring to shares of DineEquity, which reported better-than-expected results before Wednesday’s bell, with help from impressive IHOP numbers.

“I think that’s actually the key tell—we need to have consumer spending,” he said. And with recent consumer sentiment numbers showing that Americans are getting more pessimistic, if anything, “I’m very wary of the idea that we can kind of grow our way into the gains.”

Read More Consumer confidence sinks in July

Lower oil prices, then, appear to be dragging on energy companies’ earnings far more than they are helping the prospects for consumer discretionary names. And that could create an issue for stocks as a whole—no matter how much syrup one puts on top.

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