Meanwhile, economic news has not started off well this week. After a good April retail sales report last Friday (which caused some Wall Street analysts to ratchet up their second-quarter growth estimates), we have seen weaker numbers from May Empire State Manufacturing, April industrial production and capacity utilization, and today April housing Starts and higher initial jobless claims.
(Read more: Slow Growing: Bad News for Jobs, Housing; CPI Tame)
One thing that is not increasing: inflation. Both producer prices and consumer prices are lower than expected—almost deflationary. And euro zone consumer inflation is at a three-year low as well.
This plays into the falling commodity prices story, which have been discussing this week.
1) Wal-Mart reported earnings of $1.14, a penny short of consensus, with revenues also light. U.S. same store sales declined 1.2 percent, worse than most expectations. Second-quarter guidance of$1.22-$1.27 was below consensus of $1.29, with same store sales expected up 0 to 2 percent.
Management indicated Q2 was "off to a good start" and there's some reason to hope the second quarter will be better than the first. The payroll tax hike will remain a negative, but weather will be better, there are delayed income tax refund checks now being spent, and even gasoline prices are a little lower.
A couple points: a) management seems to be setting the bar low for Q2, and b) WMT is a heavily shorted name. In fact, many retail stocks are heavily shorted. Why? Because stocks are expensive and the fundamentals are only fair. Online sales are a "raging secular headwind," as one trader said to me this morning.
2) Cisco, surprised markets with its earnings. It raises a question: is IT spending doing better? That goes against other commentary we have heard. And order trends were positive. Book-to-bill ratio was 1.0, an improvement from the prior quarter.
Yet here's the most important fact: CSCO beat and guided in line. I know that's not terribly exciting, but consider that most rivals both missed on the quarter and guided lower. I'm talking about Juniper, F5 Networks, Aruba Networks, Riverbed Tech. CEO John Chambers sounded optimistic--even cheerful--in an interview on CNBC.
(Read More: Cisco Strength Good Signal for Economy: CEO Chambers)
3)NYSE IPO: William Lyon Homes (LWHS): 8.7 million shares at $25 each, a dollar above the range of $22-$24. This follows from Tri Pointe Homes on January 30, and Taylor Morrison on April 10. TPH priced at $17 and is now trading at $19; TMHC priced at $22, now trading at $25.86. So the expectations seem to be that William Lyon will open at a premium, cementing its place as one of the largest western regional home builders.