Wall Street's bull will use any excuse to run right now.
Just look how stock investors turned bad news from the banks into good news for the market this past week. Then jobs data Friday sparked a massive rally just because it didn't miss expectations.
The Dow ripped through a record and the S&P 500 closed out the week at a historic high. The Dow ended the week at 14,066, up 1.2%. The S&P was up 2% at 1557, and the Nasdaq was at 2780, up 2.9%. It's the best week for the Nasdaq since March.
This coming week is the official start of the earnings season with Dow component Alcoa reporting after the bell Tuesday. Investors will have a bunch of new data to look over including trade data, import prices, retail sales, producer price inflation data and the minutes of the Fed's Sept. 18 meeting and its emergency meeting in August. Also coming up this week is the big Republican debate Tuesday on CNBC, the first to include Fred Thompson. Maria Bartiromo and Chris Matthews will moderate.
It was clear this past week that there's been a marked improvement in market psychology. Some big leveraged deals show signs of moving to completion, including the $32 billion buyout of TXU by KKR. The commercial paper market, where companies get short term financing, shows continued improvement and there's just been a significant reduction in "fear." On trading desks, there are more jokes, less jitters.
The fact that Wall Street seems happy to write off a high degree of its worries about the banks and brokerages with a spate of announcements on earnings writedowns has calmed some nerves. Plus, the dollar's weakness makes it very likely that foreign buyers will keep plunking down euros and other currencies (even loonies) for U.S. companies.
CNBC's Jim Cramer warned us on July 20 that the stock market was about to sell off and that it was time to take profits. He's a whole lot more comfortable with the market right now. With its run back into record territory, I asked Cramer where he sees stocks going.
"14,548 was my initial (Dow) target. I stuck by it during the summer, and I continue to believe in that," he said.
He says among the stocks that will help drive the Dow are the financial giants - American Express, Citigroup, J.P. Morgan and AIG. "They are the most undervalued stocks in the Dow, and they are very compressed. I think they'll get us there," he said.
Other stocks that will kick in are Boeing and GM, he said. Cramer says the market will back and fill between now and year end, but he holds fast to his target for year end, even if it seems close at hand.
And when that level is reached, the "market will be overstretched on a price earnings basis." What then? I ask. "I'll have to see what it's like then," he said.
For now though, he says the market looks good. "The weak dollar will save a lot of companies this quarter," he said.
Speaking of earnings, Yum Brands reports Monday. Pepsi reports Thursday and General Electric (CNBC's parent) reports Friday.
As we get closer to the start of earnings season, some big warnings have changed Wall Street's estimates. As of now, Thomson Financial says earnings for S&P 500 companies are expected to collectively grow a puny 1.4%. That's down from a week ago, when earnings for those companies were expected to grow 3.9% over last year's results. It's also way below the 7.7% growth in the second quarter.
Blame it on the financials, which make up a big chunk of the S&P 500. Citigroup's earnings writedown helped drag down the comparisons and so did Merrill's expectations of a loss per share. But those stocks are some of the best performers for the past week. The S&P financial sector was up 4.5%.
In a different time, it would be hard to imagine a week that looked this good had started with a warning from Citigroup before the bell Monday, and finished with a $5.5 billion writedown from Merrill Friday.
UBS' seasoned floor trader Art Cashin, a regular on CNBC, put the market in some perspective when he spoke with Dylan Ratigan on Closing Bell Friday.
"I'm encouraged. Two to three weeks ago we had people tiptoeing around in trench coats and false moustaches to borrow money from the discount window. Now, nobody's at the discount window. They seem to be able to find financing somewhere else. I don't think the log jam is completely broken. Commercial paper is moving. Asset-backed commercial paper is not moving as much...but this is a long, long way from where we were two weeks ago," he said.
"You remember a month ago, stocks were on suicide watch. Then, a week or so later we were heading to new highs. Now, they're partying like the almighty," said Cashin.
The jobs data, both the report for September, and the upward revision in August, has quieted some of the recession worries for the time being. It has also reduced the chances for a Fed rate cut Oct. 31 though that's still up for debate.
Certainly, the minutes from the Fed's September 18 meeting and its emergency August meeting will be a highlight when they are released Tuesday. The debate will focus on whether the 1/2 point jolt the Fed dished out in September was enough to allow credit markets to work and keep the economy from choking. Those minutes are released at 2p ET.
On Thursday, jobless claims are reported as is international trade and import and export prices. Chain stores report their September sales Thursday, and on Friday the government's retail sales report is released. Also on Friday, producer prices, business inventories and consumer sentiment are reported.
CNBC's Rick Santelli says there could be an pick up in inflation showing up in PPI and the following week in the consumer price data. "I think you'll see it in PPI and CPI. I just don't know how much its going to show up in the core," he said. (Core PPI excludes energy and food) "We'll revisit how wise it is to continue to consider inflation indicators without taking into account food and energy prices," two areas that have shown big price gains.
CNBC's senior economic correspondent Steve Liesman says he'll pay close attention to trade data and import prices for impact from the weaker dollar. The dollar this past week gained 0.9% against the euro and 1.8% against the yen. For the year, it is down 6.6% against the euro and 1.8% against the yen.
On Tuesday, St. Louis Fed President William Poole speaks before the Industrial Asset Management Council Convention in St. Louis and San Francisco Fed President Janet Yellen speaks in Los Angeles.
Fed Chairman Ben Bernanke speaks at the Dallas Fed on Friday. His topic is "John Taylor's contributions to economics." Vice Chairman Donald Kohn also speaks that day.