Earnings expectations driving market rise?

Today’s Wall Street Journal is reporting that the recent rally in the stock market is largely attributable to second quarter earnings expectations taking hold of investors.  Several weeks ago I said that most of the news that could drive financial market levels was negative, but for the glimmer of hope of a good second quarter earnings season.

While some companies have already reported, the bulk of the important reports start coming next week.  I said several weeks ago, and I will reiterate now, that earnings are likely to be solid.  The reason is that except for a poor showing in June, both April and May saw fairly robust consumer spending, manufacturing growth, and other economic data were also good.  Additionally, the European Union has demonstrated an ability to respond to economic crisis that has been missing for its entire existence.

Hopefully what will happen is that earnings will exceed expectations, driving the stock markets higher.  That, in turn, should lead to renewed consumer confidence.  I would love nothing more than to see the fear that has pervaded the First World economies for the last 3 years to finally dissipate.

One potential storm cloud on the horizon is that Greece is trying to raise additional debt capital next week.  If that goes poorly then financial markets may freak out again about Europe.  But let’s hope not.  My feeling is that Greece will be able to raise money through issuing debt.

Jason