Mounting concerns over unemployment, country-debt quality, and housing helped send the S&P 500 down 2.4% from Monday’s close, but the index remains .7% above last Friday’s close and more than 31% ahead of its low reached March 9th. A bit of cooling is inevitable as investors are perhaps a bit too far in front of the economic data; data which largely expresses ‘less bad’ news than truly good news on the recovery.

The drumbeat of worsening economic news on jobs, corporate profits, bank downgrades, auto makers, and housing continued this week, yet the market is higher by 1.6%. It was a week of new records as inflation fell 1.7% in November, faster than at any time since records began in 1947. Construction of single-family homes dropped 16.9 percent to a record-low 441,000. Oil by the barrel has fallen 75% from its record high of $147.27 reached only five months ago on July 11th. But the most remarkable records were made in US Treasuries. Yesterday, the yields on two, five, 10, and 30-year US government debt reached the lowest levels since the Treasury began regular sales of the securities. The Fed dropped the target on their main rate to near zero on Wednesday. We saw the yield on three-month Treasury bill actually fall to a negative return.

Is the rally of the last few days for real – is the market bottom in place – do stocks rise from here – is the Bear dead?  Earnings drive stock prices in the long run and those reported so far this quarter suggest substantial improvement.  Nokia, for instance, said that they saw earnings stabilize in the second quarter and now believe by third quarter results that the turnaround is for real.  IBM reported an earnings increase of over 10% in a very difficult information technology-spending environment.  UnitedHealthcare said its earnings rose over 53% on cost-cutting and increased premiums.  Numerous others today and the preceding several days have beaten their earnings goals.