Party Like It's 1938

The market's rolling these days. The Dow has shot up by more than 20% over the past 13 trading days. According to this morning's Wall Street Journal, this is the quickest bull rally since 1938.

Why aren't you convinced? The question is rhetorical, because I'm not convinced either.

I'm certainly happy to see longs rewarded, for a change. It's not as if anyone can call this month's rally excessive, because stocks would still need to nearly double to hit their all-time highs.

However, there are several reasons to be nervous. Wall Street may be bullish, but the fundamentals didn't exactly RSVP to the shindig.

1. Even the good companies are scaling back
Last night brought retrenchment news from two of the dot-com darlings.

• Amazon.com (NASDAQ:AMZN) will be closing down three of its distribution centers. The 210 employees at the centers in Red Rock, Nev., Munster, Ind., and Chambersburg, Pa., will be given the opportunity to relocate to a different shipping location, but I doubt that few -- if any -- will be able to justify the move.
• Google (NASDAQ:GOOG) announced changes to its sales and marketing departments, with plans to eliminate as many as 200 positions globally. "We over-invested in some areas in preparation for the growth trends we were experiencing at the time," said Omid Kordestani, senior vice president of global sales and business development. In other words, the future isn't as bright as the company once thought it would be.

Layoffs continue in Corporate America. Tyson Foods (NYSE:TSN) announced this morning that it would close a meat processing plant, displacing 580 workers. IBM (NYSE:IBM) will cut 5,000 jobs.

This could all be a seasonal push as companies try to get their employee ranks in check before the end of the quarter, but it's hard to take the Amazon and Google cuts lightly. Amazon has been growing market share. Why would it want to scale down? Google is still growing as the leader in paid search. Why would it want to release hires that will undoubtedly look for work at its rivals? Clearly, these companies aren't as optimistic about the future as the market's cheerleaders.

2. I miss the pessimism
I'm no worrywart. I was mocking the fearmongering as the market bottomed out earlier this month. When I spelled out my thesis for the Dow not hitting 5,000 -- as it barreled toward 6,000 -- one reader suggested that 1,400 would be the Dow's ultimate hammock.

I do find it troublesome when people stop talking about floors and start gabbing about ceilings.

There is a flaw to my approach, and I realize it. Pessimists were out in droves when the market first surrendered 20% of its highs reached in 2007, and the market clearly kept heading lower through most of 2008 and the first two months of 2009. It's too simplistic to assume that the market will rise only because it falls, and vice versa. However, the market has rallied sharply at a time when money market fund and bond yields are at -- or nearly at -- historic lows. If this doesn't trigger an extended migration back into equities, it's hard to imagine what will.

3. Earnings season is just around the corner
When I suggested that the market was bottoming earlier this month, I argued that investors were already discounting what should be a disastrous slate of quarterly reports that will begin to trickle in by mid-April.

Now that optimism has taken the relay baton, maybe some of the pessimism that was already baked in has been baked out.

Let's go over a few of the tech bellwethers, to see what analysts see in their crystal balls.

Source: Yahoo! Finance.

Lower earnings aren't pretty. They plump up earnings multiples. They dash expectations for growth. The upside here is that investors are already braced for the shortcomings, as long as reality doesn't clock in even worse.

I guess that's why I'm bothered by the wave of layoffs this week, because I figured that companies could surprise on the upside, given earlier cutbacks and the internal incentives to boost productivity. Why are they scrambling to trim the fat now?

And I guess that's why I'm saving my inner optimist for the companies that are actually expected to post higher earnings during this very challenging quarter.

We'll see how it plays out. For now, I'd be happier if my fellow investors weren't.

Fingernails? Meet my chattering teeth.

Some other reads to get you through the weekend:

• 3 Reasons Why the Dow Won't Hit 5,000
• 7 Stocks That Should Soar Next Month
• You're All Hypocrites