The economic data continues to be bleak these days with housing numbers continuing to worsen showing more and more that housing is far from a bottom.  Additionally, Bernanke flinched for the first time yesterday in his testimony mentioning that the economic future  is unusually uncertain despite expressing confidence in the recovery for most of the past year.  Despite these developments, stocks are up big today!  The Dow is up over 200 points.  Why?

Well, earnings have been great.  Corporations are continuing to produce impressive profits and are earning cash.  The problem is this is not having even close to the same effect on the real economy as it used to where corporate profits typically would translate into investments and job growth.  Unfortunately, corporations continue to hoard cash.

Why are they hoarding cash?  Well, I would guess that they either don’t know where to invest the cash or they are nervous about future growth prospects or future regulations.

For examples of stellar earnings, consider the following companies and stocks:

• Apple Inc. (AAPL): Quarterly earnings up 78%
• Caterpillar, Inc. (CAT): Quarterly earnings up 91%
• Starbucks Corporation (SBUX): Quarterly earnings up 37%
• Philip Morris Int’l (PM): Quarterly earnings up 28%

The earnings are absolutely excellent for many companies and investors should be excited.  The problem is that we have a tale of two economies where the large corporations are making a killing, but small business is continuing to struggle; or corporate executives are making a killing, but the average Joe is continuing to struggle.

How do we reconcile the disparity?  Well, first, many of the huge companies with the best earnings are multinational companies with revenues from around the globe.  Companies with major operations in emerging markets are benefiting from the growth in such markets.  Second, the major corporations have access to the capital markets which allow them access to cheap capital to fund their operations.  Small businesses on the other hand are strapped for cash.

Moving forward, I would guess that the realities of the two economies as I call them will merge somehow whether that means small business catches up or big business slows down.  If it is the latter, then you can bet on more anxiety for millions of Americans which will result in more political posturing to “help the little guy” and punish the “fat cats.”  Welcome to the new normal in America.