Today’s rally is based on promising news out of Europe in regards to getting close to a solution for the toxic debt on the banks balance sheets, yet we saw the nationalization of Dexia Bank by the Belgian State and the postponement the EU summit by six days.  Not exactly resounding comfort, remember the EU is made up 17 countries, all with different ideas of what should happen and how, the United States has a hard enough time to accomplish meaningful legislation with only two parties – imagine the difficulty of dealing with 17 countries.  Austria’s Erste Group Bank – reported a loss of $800 Million Euros after suffering in foreign currency loans and euro zone sovereign debt.

Taking a look at what is happening at home is not a rosy picture by any stretch.  Growth forecasts for the US Economy for 2011 are 1.6 percent after 3 percent growth in 2010, consumer spending was a dismal 0.2 percent in August and we have declining incomes for the first time in 2 years.  Investors need to keep in mind that earnings reports are results that occurred in the past, what they need to focus on is what companies have to say about their future growth prospects.  Pessimism persists with the US consumer, retailers are anticipating a bleak holiday season (Brooks Brothers was having a sale on sweaters already).  Financial companies will have earnings that more than likely will disappoint because of lower trading revenue and investment banking revenue.

Are the emerging markets starting to crack?  Stay tuned for an interesting week of earnings – pay special attention to Pepsi and Alcoa’s conference calls and what is said about future expectations.