Europe remains front and center for the market even as the auction of short-term Italian treasury bills went smoothly this morning. The fear in the market is that if Europe has been unable to resolve the debt problems of a small member country like Greece, how will it cope with Italy, which is simply too big to bailout.
But even as this evolving European story keeps market anxieties elevated, it is the domestic economic picture that is of utmost importance for stocks. And we have not been getting decent reports on that front lately. Friday’s labor market disappointment was just the latest in a long line of reports showing the U.S. economy sub-par performance.
This morning’s wider than expected trade deficit numbers will likely be a further drag on second quarter GDP growth, which had already come down to the 2% range over the last few weeks. The expectation still remains that the economy will bounce back in the second half of the year. But it will be difficult to sustain those hopes in the face of disappointing numbers.
On the earnings front, Alcoa (AA) got the quarterly earnings parade going after the close on Monday with an inline report. We had Fastenal (FAST), the maker of nuts and bolts, come out ahead of expectations. We are some days away from getting a good sense of the earnings season, but the next few days should give us some flavor of things to come with reports from such bellwethers such as Google (GOOG), JP Morgan (JPM), and Citigroup (C).
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