Many companies beat quarterly earnings forecasts

— -- Companies aren't tripping over the low bar set for them this earnings season, and that's turning out to be a big relief for investors.

Two-thirds of companies in the Standard & Poor's 500 have reported second-quarter earnings, and more than 74% have beat expectations, says Thomson Reuters. If that torrid pace continues, it will be the biggest margin of outperformance since Thomson started keeping records in 1994.

That's welcome comfort in what was another horrible quarter for corporate profits: Earnings of S&P 500 companies so far are down 36.8% from a year earlier, says S&P's Howard Silverblatt. "The willingness of the market to believe less-worse is better is a long way from booking (profit) gains."

Maybe so, but less-worse seems good enough for investors. The Dow Jones industrial average soared 725 points, or 8.6%, since the second quarter ended on June 30 and companies have been reporting second-quarter results. The broader Wilshire 5000's 7.7% gain for the month was its best July ever. What have investors seen in the earnings reports of the hundreds of companies so far?

•The free fall hasn't ended, but it's slowing. As bad as the 36.8% second-quarter profit drop looks, it beats the 39.2% decline in the first quarter. There's hope the companies yet to report will make the second quarter look even better. Many retailers, for instance, still haven't reported and have easy comparisons with a year ago, when their profits were weak. S&P expects second-quarter earnings ultimately to be down just 15.7%.

•Surprises are nice, but few companies are reporting gains. Investors are choosing to focus on the fact that four companies have beaten expectations for every one that has missed, says Dirk van Dijk of Zacks Investment Research. That's well above the typical quarter, when only three companies beat expectations for every one that misses them. Still, only 32% of companies have posted earnings above last year's levels, van Dijk says.