Will Earnings Improve? - Economic Highlights

Now in the heart of Q1 earnings season, it's looking more and more like we're going to have to wait yet another quarter for real earnings growth to take hold. Especially in the finance-heavy early part of earnings season, from JPMorgan JPM to Bank of America BAC we've seen the writing on the wall: the U.S. economy in the first three months of 2014 remained sluggish.

It's tempting to blame the awful weather we endured this past winter, and there is a case to be made that economic growth has been held back until warmer climes prevail. But the fact of the matter is we're seeing virtually the same sluggish results this quarter that we have for the past several.

Even when one sees some positive news, like today with better-than-expected results from Goldman Sachs GS, Morgan Stanley MS and General Electric GE, it's important to remember that we entered Q1 with a slew of negative earnings revisions. Year over year comparisons often reveal weaker data for companies than earnings headlines do.

This is important to consider in a current stock market climate that has seen strong gains over the past day and a half, making back most of what was lost late last week. But without strong earnings data to stand on — to say nothing of geopolitical messes brewing in places like the Ukraine — just how bullish would you consider this market early Thursday?

Fed Chair Janet Yellen yesterday indicated no major shifts to Treasury policy, citing that the U.S. economy was still “far from maximum employment.” Meaning that her quote from last month that a “considerable time” of continued bond repurchases of “around six months” will likely be longer than that. And the overall weakness of Q1 earnings season appear to bear this decision out, at least at this stage.

Jobless claims, even though they ticked up week over week, remain at an encouraging level, however. Continuing claims are down and, perhaps most importantly, the four-week moving average is down considerably — to 312K.

Perhaps this indicates we'll have greener times directly in front of us. Certainly spring has finally sprung in many parts of the country, and if much of the Q1 weakness is indeed weather-related, maybe we'll finally start to see some economic traction. It's certainly about time.