While in the long term, investors are spooked by the soft economy, in the short term they are encouraged.

In a crappy economy, the Federal Reserve is keeping short term interest rates near zero, and buying Treasuries like crazy, pumping billions of dollars into the financial system. 

This is optimistic for stocks, because all that money gets driven into financial markets, and with interest rates low, financing costs are low, so corporate profits are pushed up. Cheap money will save the day.