Earnings less than impressive, but sun shines on stocks

Let's talk earnings first.

Major bank earnings stung by capital market pressure.  The major banks posted less-than impressive earnings – blame uncertainty in the capital markets and weaker trading revenues.
But there have been positive takeaways:

• Lending growth has started to accelerate, mimicking loan data provided by the Fed
• Credit quality is slowly improving
• Capital ratios remain solid

Earnings, Earnings, Earnings: It’s still early but just 47% of the companies of the less than 10% of the S&P 500 that has reported through Jan 18th have topped estimates, down from 70% in the previous four quarters (Wall Street Journal). And it’s been a much-reduced bar that companies have had to clear.

The earnings season is young. Let's see if we get a shot in the arm from the non-financials.
===================================================
Despite the slow start to earnings season, it's RISK ON in the market! Last year's losers, materials and financials are this year's winners, as funds rotate out of last year's winners, utilities and consumer staples.

But let's be clear, despite the massive amounts of liquidity offered by the ECB, troubles in Europe haven't gone away, and we aren't seeing the needed fiscal reforms that would put the continent on a path toward fiscal solvency. But for now the focus has returned to our shores, as the economic data have been generally upbeat.
 ===================================================
Turning to the data,

1-Weekly jobless claims tumble 50k to 352k. That's impressive and strongly suggests the expanding economy is forcing companies to hold onto employees.

But let's wait one more week on this volatile indicator. Yes, it's timely and suggests 2012 is off to a fast start, but quirks in January's data can sometimes dull the value of the report at this time of year.

2-Housing starts - Housing stocks caught fire late last year and yesterday's rise in home builder sentiment to less pessimistic levels (4 1/2-year high) attracted new buyers. And Dec's drop in housing starts is a bit misleading due to a huge drop in multi-family starts.

Both single-family starts and permits advanced. No wonder builder sentiment is improving.


Stay tuned.