Wall Street soared overnight on confident assertions by just one analyst that American banks, especially Goldman Sachs, were doing well. As Goldman Sachs reveals its second quarter earnings tonight, it was a curious upgrade by analyst Meredith Whitney who is credited as being one of the few analysts to have got the problems in US banking right much earlier than most.

But the bank results (JPMorgan, Bank of America and Citigroup) this week won’t tell us how the economy is going: what they will tell us is that US banks are back to their old tricks of driving their investment banking arms harder using cheap money and Government guarantees to trade aggressively.

To find out how the US and global economies are going, it pays to look at quarterly results overnight from global majors, Philips Electronics and Korean steel maker Posco, and a similar report from CSX, a major US railroad.

Posco lifted its 2009 steel production output, despite a 71% drop in net earnings in the quarter. Posco’s operating profit in the quarter fell more than 91%. But it is planning a 6% rise in production for the rest of the year to 29.8 million tonnes from the previous 28 million tonnes. Posco sees a strong chance of a rebound in the next six months because of the sharp fall in the cost of iron ore and coal and modest price rises, but warned this all could derail if demand fades or doesn’t add to that coming from China.

Philips Electronics earned a profit, making fools of analysts who had expected a small second-quarter profit. But management said it sees only faint signs of an improvement over the rest of the year. Net earnings fell 94% in the quarter as sales plunged 30% in the lifestyle consumer division, lighting sales dropped 18% and healthcare sales eased 5%. Sales in emerging markets dropped 22%.

In the US, CSX Corp reported a better-than-expected quarterly profit, (also emphasising how little analysts know of what’s happening in the wide economy), but that was off the back of cost cuts and lower fuel prices, not higher demand for the company’s services. CSX said revenues dropped more than 24% in the quarter as freight volumes fell a nasty 21%.

And the real surprise came from Dell, the number two PC company, which told the market in the US that it is expecting a “modest decline” in second quarter profit margins because of the rising cost of parts which can’t be recovered in higher prices from consumers in such a depressed market. Dell said in the statement ” We continue to believe that customers are deferring IT purchases.” Which is bad news ahead of quarterly reports from tech giants Intel and IBM.

But the very scary story was the size of the US Government’s budget deficit: $US1 trillion and rising. That compares with $US285.9 billion for the first 9 months of 2008 and $US454.8 billion for all of that year.