Partly Cloudy with a Chance of Sun

Alcoa popped earnings season off to a strong start yesterday, beating expectations and earnings profits of 13 cents a share (expectations had been revised down during the recent correction from 20 cents to 12 cents). More importantly, Alcoa stated that all facets of its business were doing well and were expected to continue positive performance during the 2nd half of 2010. And this was and is in the face of very low aluminum prices (which is key to their profits and what they do). So, Alcoa was able to beat expectations in spite of that and in spite of slackened demand! Quite a story and you see that reflected in the market optimism this morning.

What's key to note though is the 2nd half of 2010 forecasts that will be offered by companies in their conference calls with investors. Alcoas positive remarks are the real influence here. It's well accepted that 2nd quarter earnings results are going to be positive and strong. It's the 2nd half of 2010 (and unnecessary, as of now, double dip fears) that have investors truly concerned and hesitant to invest. Thus, if companies come out with comments like "European headwinds" or "restrained consumer" or "difficult year-over-year comparisons" then these fears are fed and the market goes sideways with a downward bias.

If companies can come out and say that all facets of business are doing well and they see continued growth in future months - then we may see that 1250 S&P projection from GS by year end or sooner.

Combined strong earnings with any report that tax rates will not be increased and a Republican landslide in fall elections (which would stall further Democrat reforms) and suddenly the business climate feels much less volatile and corporations have a more subdued environment to plan and act in.

I continue to believe the Euro debt issues and Chinese real estate pose serious risks to the markets and global economy, but much like the months of Feb through April (where these risks more or less subsided and no news was issued on them), we've dealt with our fear factor on those issues in the past month and the market is ready to move past them again (for now).