Good Earnings Once Again

I think I am beginning to sound like a broken record.  Still, it is worthwhile to mention that this earnings season, like several ones before, has exceeded expectations.  82% of the companies that reported so far beat earnings estimates; over 60% beat sales estimates.  This top-line growth means that earnings don’t come only from cutting expenses, as many analysts were suggesting.  As was the case  in previous quarters, the strength comes from various areas of economy.

The markets responded quite positively to these earnings reports.  The recent worries about double-dip inflation and PIIGS countries defaulting seem like distant memories now.  No one talks about euro-dollar parity; indeed, weak dollar seems to be helping the markets.

So what happens now?  With earnings season winding down, November elections coming up next week, and no major news afterwards, I will not be surprised to see some consolidation typical of  buy-on-rumor sell-on-news reaction.  Longer-term, however, I see strong earnings trend to persist and remain to be the primary market driver.