Economic DIchotomy -- Stocks Soar As Earnings Crash

I couldn't help noticing the contradiction today between stocks, which just went positive for 2016, and both employment and corporate earnings! This is what a bubble looks like!

Earnings Suggest Recession

from Marketwatch today:

Stocks Hit by Weak Alcoa Earnings

Consumer Sentiment Declines, Stocks Rise on Positive GDP, Earnings

Consumer sentiment in the U.S. dropped more than forecast in March, damped by higher gasoline costs and the effects of Japan’s natural disaster.
The Thomson Reuters/University of Michigan final index of consumer sentiment decreased to 67.5, the lowest level since November 2009, from 77.5 in February, the group said today. The median forecast of 67 economists surveyed by Bloomberg News projected a reading of 68.
Gasoline prices hovering near the highest levels since October 2008 are straining the finances of American households, whose spending makes up about 70 percent of the world’s largest economy. While unemployment has fallen for three months, Japan’s earthquake crisis led to a plunge in stock values, at one point wiping out all of 2011’s gains.
“Consumers are concerned about the rise in gasoline and food prices,” said Ward McCarthy, chief financial economist at Jefferies & Co. in New York who correctly forecast the drop. “People who are now shelling more money out of their pockets every time they fill the gas tank have a whole lot less left over for anything else they want to spend money on.”
Forecasts in the Bloomberg survey ranged from 65 to 71. A preliminary reading issued earlier this month was 68.2. The sentiment index averaged 89 in the five years leading up to the recession that began in December 2007.

Spooked Market

NEW YORK (MarketWatch) -- U.S. stock losses deepened Friday, dragged lower by disappointment over Microsoft, Ford and Amazon earnings, and a drop in consumer sentiment...
U.S. stocks opened higher but lost gains shortly after a survey of consumer sentiment by the University of Michigan and Thomson Reuters showed individuals growing more pessimistic, largely due to rising food and fuel prices. Read more on consumer sentiment.
Gross domestic product, the broadest measure of all the goods and services produced, rose at an inflation-adjusted annual rate of 3.2% in the fourth quarter, the Commerce Department said in its first estimate of the economy’s benchmark indicator. It was below economists’s estimates for a 3.5% increase. Read more on gross domestic product.
Still, the rise takes total output to its highest level since the end of 2007, when the recession started. And for the first time in 2010, the economy also benefited from a trade surplus in October to December.
Consumer spending, accounting for about 70% of demand in the U.S. economy, rose at a 4.4% rate in the fourth quarter. That’s the fastest pace since the start of 2006 and double the average rise in spending in the previous three quarters of 2010.

Earnings Season Off in Earnest

Even Goldman tops estimates, but has lower earnings. That seems contradictory, but not when lower earnings guidance is baked into the cake.

Corporate Earnings Begin to Show Signs of Exhaustion Along With Economy

from WSJ:

Geysers are spectacular—while they last.
The same might be said of highflying U.S. corporate earnings. They dazzled investors the past year, but now it looks as if their growth may be waning. Although second-quarter profit came in strong, with S&P 500-stock index companies posting 38% year-on-year earnings growth, estimates for 2011 results continue to fall.
Analysts now expect 14.7% earnings growth for S&P 500 companies next year, according to Thomson Reuters.