Earnings are recovering. But that will ultimately not help the markets. Because companies are still short of cash.
At times like these, credit is the key. The old saw is,"to finish first, you must first finish." Companies that go bankrupt don't qualify. Or if they do, it is in the worst way, like General Motors or Chrysler.
There is a time bomb in the economy, and that is higher interest rates. Companies have been loading up with debt all through the recession, with no apparent damage, because of low interest rates. Come the expected economic recovery, interest rates will rise. So will interest expense, the most immediate thing on a company's expense report, and then earnings will plummet.
Some earnings declines aren't so bad. That is those due to asset write-offs, of past expenditures. But there's nothing "past" about interest. It has to be paid NOW. That's why the rate of bankrupctcies will rise with the recovery, choking the stock market's advances.