Optimism despite low earnings

NEW YORK – With all the predicaments facing the markets these days – credit growing scarcer, oil near a record $90 a barrel, home prices in the dumps – it would be logical if investors were shoving money under their mattresses, instead of into stocks.

But logic doesn’t always prevail on Wall Street.

The Dow Jones industrial average plunged almost 400 points on Friday, its fifth-straight loss for the week. Yet, Wall Street’s pundits did not waver on projections that share prices will rise again after companies finish reporting quarterly financial results.

“There are a lot more people who are bullish than bearish, and there’s a mentality that even a pullback would create an opportunity to buy,” said Todd Leone, managing director of equity trading at Cowen & Co.

While there are worries about the economy heading toward a mild recession, investors are still energized by the potential for U.S. companies to grow. Companies might have had their most challenging quarter in five years, but they are still sitting on large cash stockpiles – and those with international units are able to take advantage of growth outside the U.S.

Furthermore, Wall Street doesn’t expect the credit turmoil will send a shock wave through other parts of the economy. The debt markets have remained mostly intact and problems appear to have not spread to other asset classes.