U.S. stocks and exchange traded funds (ETFs) snapped a two-day losing streak and were up in morning trading on speculation that that sectors other than financials will get a government handout.

Yesterday was opening day for earnings reports and the following was reported:

  • Alcoa (AA) fell short of analysts’ expectations by reporting a decline in net income of 54% and a decline in sales of 6.7%, sending shares of the aluminum maker down by about 3% in intraday trading
  • Family Dollar (FDO) beat analysts’ expectations by reporting an increase in profits of 15 cents per share over a year ago. Analysts expected an increase of about 5 cents.  This sent the shopper’s share prices up by about 5.3% in morning trading
  • More good news was reported by home furnishings giant Bed Bath and Beyond (BBBY).  The company beat analysts’ expectations by reporting a smaller-than-expected decline in profits, sales and gross margin, all a result of linens liquidations and a less-than-expected impact from trade down and promotional pressures, states Andria Cheng of MarketWatch.

Keep in mind that it is just the start of earnings season.  Tomorrow, Chevron (CVX) will announce its earnings. To stay on top of these reports, take a look at the earnings calendar.

To add to the market’s comeback, Pulte Homes (PHA) has agreed to buy Centex Corp. (CTX) to form the nation’s largest homebuilder. The deal is expected to be done in a $1.3 billion stock transaction and could potentially spark further consolidation of an industry that has seen the worst real estate recession in more than a decade. The deal is also being fueled by fierce market forces, which include tight credit markets, high unemployment rates, uncertainty in the future of the economy and low consumer confidence when it comes to purchasing homes, state Michelle Chapman and J.W. Elphinstone for the Associated Press.

The news has had a positive impact on the home construction industry. it sent the iShares Dow Jones U.S. Home Construction ETF (ITB), up more than 1% in intraday trading and down 8.9% year to date; PHA is 7.5%.

There is still more good economic news.  Sales at U.S. wholesalers rose for the first time in eight months, which indicates that distributors are on the right track to eliminate the glut in stockpiles.  At the current sales pace, it would take 1.31 months for distributors to deplete the amount of goods on hand, reports Timothy Homan for Bloomberg.  This decline in stockpiles is a major reason analysts project that the economy shrank again last quarter, even though they have an optimistic look for economic growth in 2009.

The Dow Jones Industrial Average gained about 0.4%, the S&P 500 was up about 0.74% and the Nasdaq jumped about 1.38% in intraday trading.

Kevin Grewal contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.