By Michael Brush

While investors seem focused on the negative headlines this earning season, there's actually plenty of positive news for the economy -- and some facts that outright dispute the negative headlines.

 

My key takeaway in all this: As I recently told readers of my Brush Up on Stocks newsletter, investors are overlooking some pretty bullish news on the economy that suggest it's better to be buying rather than selling on the big down days.

 

My favorite example of hidden good news so far: Headlines across the board Monday claimed International Business Machines (IBM) missed revenue expectations. This is flat-out misleading. All of the "miss" was due to an unusually strong dollar. That meant the tech giant translated foreign revenue back into fewer greenbacks. It's no reflection at all on the underlying strength of business or the economy.

 

"For revenue, we did exactly what we said we were going to do. The difference is all currency," IBM finance chief Mark Loughridge told investors in the company's conference call Monday.

 

But in a gloomy market controlled by the bears, who cares about analysis? The order of the day is to feed the bears with gloomy numbers.

 

Here's a quick roundup of some of the positives.

 

Guidance up

 

While investors focused on that "revenue miss" at IBM, the bigger news for me was that the company upped guidance for the second half of the year. "I feel quite confident that we’re going to have good transactional performance ... as we move into the third quarter and the back half of the year," said Loughridge. IBM expects full-year earnings to be at least $11.25 a share. The company previously forecast earnings of $11.20 a share. IBM’s CEO Samuel Palmisano predicted that operating earnings could double by 2015.

 

Texas Instruments (TXN) also offered bullish third quarter guidance on what finance chief Kevin March described as "broad based" growth he's seeing "across all of our product lines."

 

The key here is these are two cyclical companies -- meaning their outlooks give us a great read on the economy.

 

Growth seems pretty robust

 

Other very cyclical companies confirming the strength of the economy last week were Intel (INTC), which posted a record second quarter in what's usually a weak quarter, and the railroad CSX (CSX), which posted a phenomenal 22% revenue growth, mostly on higher volumes as opposed to price increases.

 

Again, looking beneath the headlines, an analyst on the CSX call tried to pin CEO Michael Ward down on recent economic trends, asking whether the "body language" of customers showed greater cautiousness on the economy in the last month.

 

Quite the opposite. "Body language is much better than it’s been in the recent past," said Ward. Chief commercial officer Clarence Gooden told investors an "improving economy helped almost all the markets that we serve." Both of these comments tell me the economy is doing much better than you'd think, given all the talk of a double dip recession, and the market's reaction to earnings news so far.

 

Corporate spending is strong

 

Intel posted a record quarter because companies spent big time on servers, and PC upgrades. To me, this represents a shift in attitude among businesses, which is pretty bullish for the economy.

 

It means companies are starting to unleash their enormous cash treasure troves, which recently stood at $1.8 trillion. There has to be a lot of pent-up demand, since companies have been holding off on spending for so long.

 

Intel also reported small companies are upgrading PCs. That's another good sign, because it means small companies are getting more confident -- and they are a big growth engine for jobs.

 

China and Europe are fine

 

Part of the bear case is that significant slowdowns in China and Europe will drag down the U.S. economy.  Scratch beneath the headlines and we are seeing just the opposite.

 

Texas Instruments said growth in Europe kept up with overall growth at the company last quarter, when Europe was supposed to be melting down because of a debt crisis. "We did not see it at all in the second quarter," said Texas Instruments head of investor relations Ron Slaymaker.

 

Intel said its quarter started off slow in China in Europe, which was also troubled by the volcano in Iceland and currency volatility. But ultimately, "everything was nicely up" for the quarter in both regions, said Intel CEO Paul Otellini.

 

Inventories are weak

 

Inventories remain very lean. "We don’t see any inventory issues out there," said Intel CEO Otellini, a sentiment we heard from CSX, too. This confirms the fairly old May data from the U.S. Census Bureau showing that inventories are tight -- the most recent official data.

 

Why is this bullish? It means if confidence in recovery improves, there's plenty of room for restocking to add an extra fillip to growth. (Just as destocking added to economic weakness on the way down.)

 

What's next

 

Of course, we need to see a steady flow of positive earnings surprises and bullish guidance to get a rally going again in stocks. But I won't be surprised if earnings season finishes fairly bullish overall, because coming into this season the ratio of negative to positive preannouncements was well below the long-term average and below that for the first quarter, according to Thomson Reuters.

 

So I think it makes sense to continue to accumulate stocks on pullbacks -- especially ones with solid insider buying like Monsanto (MON), or strong defensive companies that pay a decent dividend like Kimberly-Clark (KMB).

 

Stocks look cheap, with the S&P 500 selling under 12 times estimated 2011 earnings. Sentiment remains extremely negative, as too many investors are still putting too high a probability on a double dip recession. But the clues beneath the headlines in key conference calls are telling us things are not really that bad. 

 

MSN Money columnist Michael Brush is the editor of  Brush Up on Stocks, an investment newsletter.