Kass: Don't Buy Big-Caps' Big Move Up

This column by Doug Kass appeared earlier today on Street Insight.Please click here for information about subscribing to Street Insight, where you can read Doug Kass' comments, as well as those from other market pros, in real time.

As I've discussed, the trend in better-than-expected first-quarter corporate profits has clearly been the main contributor to the market's amazing skein this month -- 18 out of the last 19 trading days have been up.

A bear's glib response might be that this achievement was accomplished against lowball guidance. To be sure, that has been the case, but even more important is that an analysis of the quality and composition of the better-than-expected rise in revenue and profit suggests that there was less than meets the eye to these returns. (Markets are definitely in an unskeptical mode, as both good and bad news is interpreted favorably.)

As such, more aggressive buybacks -- the rapidity of which should drop as corporations contend with higher stock prices -- and the impact of nonrecurring currency gains have clearly not impacted valuations negatively, but in the fullness of time they might.

We know by now that the U.S. end markets have weakened in the first quarter, even as international markets, particularly in Asia, have remained strong. It is a tale of two different economies.

As an example, I have written about about the opposite ends of demand for Graco (GGG Quote), which manufactures equipment to apply paint and other coatings on automobiles, appliances and furniture. Graco missed consensus earnings expectations and had its first profit decline in six years.