Quotes of the Day

It's tempting to throw in the towel. After a rash of earnings disappointments last week, the Dow and Nasdaq tumbled to new year lows. Tensions over Iran's nuclear ambitions and rising oil prices are compounding fears that the stock market is on shaky footing. Yet there is much to suggest that the market, which was mixed but stable on Monday, will float higher in coming weeks and months. So hang in there.

There's no telling what will happen with Iran, of course. More often than not, though, these kinds of international crises pass without derailing the economy. And the economy today is in good shape—slowing, granted, but just enough to bring a welcome end to the Fed's inflation-taming campaign of short-term interest-rate boosts. Historically, this point in the cycle has been a great time to be in stocks.

More important is the fact that the news that tanked the market last week was grossly misjudged. Most earnings reports have been very good; it's just that Wall Street types, as usual, were hoping for even better, and their disappointment whipped up a tornado of selling that they may soon regret. Consider last week's big earnings so-called "misses." Apple Computer's net income rose 92%; Yahoo reported an 83% profit gain; Motorola's profit was up 86%. Not too shabby. Yet the stocks were trashed. Arguably, these companies should have done a better job of managing Wall Street's expectations, but they could hardly be managing their businesses better.

There were a few genuine clunkers. Citigroup profit fell 3% not counting one-time gains (still, it raised its dividend 11%), and Intel fell way short of its own estimates offered just a month earlier (rival AMD posted spectacular results). On Monday, Bank of America was the latest blue chip to disappoint. Overall, though, S&P 500 companies so far have logged an average gain of 13.7% in earnings per share, according to Thomson Financial. There's a term for that level of profitability. It's called blowing the doors off. And Thomson forecasts double-digit earnings growth straight through the year, though some analysts believe that rosy forecast will be revised lower in the weeks ahead.

But here's the best news: now that the stock market has slid, it reflects more realistic expectations. There may be more disappointment when energy companies begin reporting this week, because with oil so high almost everyone is counting on windfall gains. But a lot of basic industrial firms and utilities are doing well, and as their numbers come in over the next couple of weeks investors may come to see that business isn't so horrible. It's not even just okay. It's awfully good—even though, to some on Wall Street, that's just not good enough.

• DANIEL KADLEC
• Earnings have been fabulous—but Wall Street wanted more. Has disappointment been wrung out of the stock market?