Earnings season so far

Almost without exception, earnings season has been strong. Companies continue to beat expectatins across the board with only minimal exceptions.

The big exceptions being anything housing related and oil stocks.
Housing will continue to be a source of negative surprises: analysts are foolishly expecting a soft landing in housing and it simply won't happen. The President of DR Horton said that crashes last longer and go deeper. He also said that he sees no signs of any improvement in 2007. Ouch.
Also, now we know why housing stocks have resisted a collapse: home builders have been aggressively buying their stock back. Watch Pulte Homes fall to the teens.

Worse to come
There was a lot of fraud that is only now being uncovered. Whether it was speculators with multiple primary homes enjoying mortgage interest write-offs (when only 1 is allowed), or fraudsters paying over asking price and getting kickbacks, many frauds contributed to boosting housing prices. These are now unravelling, but the effect was to keep prices artificially high. As prices begin to come down much more severely, consumer durable spending will follow home building down.

Oil companies are also in a bad place because they probably won't see $70 oil. That means that they can't beat 2006 very easily. The only possible saving grace for oil will be an all out Iraqi or Iranian war, something that upsets oil production significantly.