Decent earnings, good economic news and an indifference to Europe have stocks on the move upward in 2012. Last week marked the third consecutive week of stock market gains. The Nasdaq Composite led the way with a 2.8% gain. The Dow Jones Industrial Average rose 2.4%, while the S&P 500 added 2.0% during the same time.

We’re not yet through the first half of earnings season, but we do have a significant amount of reports that we can draw some conclusions. Of those S&P 500 companies that have reported, approximately 60% have exceeded expectations according to Thompson Reuters. This is a decent rate of beats, but it is down from previous quarters when 7 out of 10 firms were topping estimates. The drop in the rate of beats is not surprising considering the more mature state of the domestic recovery when compared to the same time last year and weakness in the world economy. Companies are now succeeding more on a case-by-case basis rather than by sector. One notable exception is the financial industry, which is benefiting from improved economic conditions and stronger consumer.

These conditions are likely to persist throughout 2012, as companies will have to rely more on top-line growth and less on the cost cutting that was prevalent in the aftermath of the 2008 collapse. Expanding revenues should not be a problem for well positioned companies. The economy is gaining strength and is poised to produce moderate growth in the 2% range. Even the housing market is showing signs of a turn upward. The National Association of Realtors reported existing home sales in December rose to their highest level in 11 months. Meanwhile, the inventory of available houses dropped to its lowest since 2007.

This week’s economic data is back loaded and begins in earnest with Thursday’s releases that include weekly jobless claims, durable goods order and new home sales. On Friday we will get consumer sentiment data and the first report on fourth-quarter gross domestic product. The Federal Reserve Open Market Committee also meets this week for a two-day session and will announce any policy decisions and its outlook on the economy after the meeting concludes Wednesday.

Somewhat surprisingly investors have been ignoring conditions in Europe since we have flipped the calendar. Greece has yet to come to an agreement with creditors on its next round of financing and a default remains a possibility. Despite the risk of bankruptcy by Greece and others, the 3-month Libor rate—the rate European banks are charged for dollar loans—has dropped for nine straight sessions. It is a strong sign the European financial markets are becoming more liquid.

Stock prices are up significantly from their fall lows but they should not be considered expensive. In fact, valuations are still low when compared to where they have been over the past two decades. On a valuation basis long-term investors can still anticipate favorable investment conditions going forward. However, the short term remains vulnerable to setbacks with Europe being the most likely trigger for sell-off. We would view any of these setbacks as new entry opportunities, as the overall tone to the economy and earnings remains positive.