Earnings season so far may look respectable, but a disturbing trend lurks below the surface: Companies for the most part are barely beating analyst expectations that already had been lowered substantially.

That's important as bullish fund managers try to sell their clients — most of whom remain on the sidelines — the stocks-are-cheap theme, bolstered by a historically below-par price-to-earnings ratio for the Standard & Poor's 500 .

Should earnings remain medicore while the European debt crisis intensifies and the U.S economic recovery wobbles, that threatens the early-year stock rally, in which the S&P 500 has gained a healthy 4.5 percent.

"Overall you're still seeing a fairly solid earnings season," says Quincy Krosby, chief market strategist at Prudential Annuities in Newark, N.J. "It's clear, however, that there are headwinds building globally. But the question is, how strong are those headwinds going to be? That's going to keep investors watching reports coming from all over the world, especially Europe."

So far, about one-fifth of the S&P 500 has reported earnings, with 58 percent beating expectations, 30 percent missing and 12 percent matching, according to Thomson Reuters data. The numbers were even thinner for banks, with just 48 percent beating estimates.

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