As the Dow Jones Industrial Average (^DJI 0.23%) rallied 26.5% last year to a number of record highs, those thinking the market was overvalued were just looking for a reason to bail on stocks. Whether real or imagined, they found that opportunity yesterday when Chinese manufacturing data came in lighter than expected. The sell-off that began Thursday continued today, with the Dow down 1.7% in late trading.

What's interesting about this small correction is that earnings reports have generally been better than expected. Today, investors don't have any significant economic data to react to, and the earnings data they do have from Procter & Gamble (PG -0.06%) and Microsoft (MSFT 0.45%) is far better than expected.

P&G impresses with no growth
Procter & Gamble is up 2.5% after delivering its report on a quarter that saw sales rise only slightly to $22.28 billion and net income fall 16% to $3.43 billion, or $1.18 per share. But those results still beat expectations.  

You can't go far without seeing one of P&G's powerful consumer brands like Tide.

Excluding one-time items the company made a $1.21 per-share profit in the second quarter, which was a penny ahead of expectations and shows the beginning of the turnaround that CEO A.G. Lafley envisioned. The other positive sign to point to is that organic sales were up 3%.

P&G isn't much of a growth company, but with a product line of consumer staples, a long history of paying a dividend, and a 3% yield it's a safe bet at a time when stocks are very expensive.

Microsoft wows on Xbox sales
It's been a while since Microsoft impressed investors with an earnings report, but the company's fourth-quarter results topped even the most optimistic expectations. Sales rose 14% to $24.5 billion and net income was up 3% to $6.56 billion, or $0.78 per share, a dime ahead of estimates.  

The impressive results came as Xbox, both One and 360, console sales rose from 5.9 million a year ago to 7.4 million last quarter. Even more surprising was that Surface tablet sales more than doubled to $893 million.

Xbox One was one of the hottest gift items this holiday season.

Microsoft has a stable business in selling operating and enterprise software, but the shift to devices has worried investors. The Xbox console and Surface tablet are paramount to that shift so some progress is welcome news to investors.

I believe Microsoft is a lot better off than most investors think, and with double-digit growth to go along with a 14 P/E ratio and a 3.1% dividend yield there's great value for investors. A competitor can't just upend Microsoft's enterprise or server business easily, so the competitive moat is wider than widely thought.

Earnings are key to long-term growth
The market seems to be overlooking strength in earnings for the fourth quarter but most companies are still beating expectations. That's good news considering the fact that multiple expansion, not earnings growth, drove stocks last year. Long term, that's what investors will care about, even if they're distracted by bearish arguments right now.