If the market is going to shift its focus to earnings, Tuesday could be the day.
Major banks JPMorgan Chase and Wells Fargo report ahead of the opening bell, as does consumer, pharma giant Johnson & Johnson. There is also the important June retail sales report as well as import prices at 8:30 a.m. ET, and business inventories at 10 a.m.
Oil could also be a major focus Tuesday, amid signs of a possible agreement between Iran, the U.S. and five other countries on the Iranian nuclear program. A deal could mean hundreds of thousands of barrels of Iranian crude could come back on the market in the next several months, a potential negative for oil prices.
As the second-quarter earnings season kicks off this week, bank earnings are expected to be a bright spot, with financial sector profits projected to gain the most among the 10 key S&P sectors.
JPMorgan and Wells start the parade of major financial sector reports, and the former is considered the industry bellwether. According to Thomson Reuters, JPMorgan is expected to earn $1.44 per share on revenue of $24.5 billion. Wells Fargo, watched especially for its mortgage business, is projected to earn $1.03 per share, on revenue of $21.7 billion.
"They could set the tone for the financial sector," said Michael O'Rourke, chief market strategist at JonesTrading. Earnings reports are also expected this week from Bank of America, Goldman Sachs, BlackRock and Citigroup, to name a few. The industry as a whole is projected to see earnings rise by more than 14.9 percent, recovering after write-offs last year, according to Thomson Reuters.
"They had easy comparisons. The capital markets business wasn't great last year. They have a low multiple relative to the rest of the market," O'Rourke said, adding health care, tech and consumer discretionary had been the market leaders for the last couple of years. Investors have been moving into the financial sector. "I think we're seeing the next rotation going on as people prepare for the next phase of policy."
The (ticker XLF) has had the biggest inflow of assets among nine industry SPDR ETFs in the past week, month and three months, according to Asbury Research.
"We're likely to see outperformance," said Asbury's chief strategist, John Kosar, who has been running a model using the SPDR ETFs for several years. Rarely has a sector ETF performed best in all three categories and, interestingly, industrials has seen the most outflows for each of the same time frames, also unusual. The XLF is up 2.5 percent in the past three months, while the is up 0.4 percent in the same period.
"If we get horrible earnings or something happens, or interest rates dive back down to 2 percent, or there's something that upsets the banks, it's going to be everybody out of the pool, and you're going to see it reflected in this table," Kosar said.
Stocks bounded higher on relatively light volume Monday, after Greek authorities agreed to austerity measures that will be voted on by that country's parliament Wednesday.
"I'm just not sure that we are there. Basically, this is obviously another 'kick the can,'" said O'Rourke. The Dow rose 217 to 17,977, and the S&P 500 was up 22 at 2,099.
"Even though we're up today. ... It doesn't seem like people are really enthused about Greece. I think people are covering shorts and were caught out of position, and I'm not sure people are going to jump back in tomorrow," he said.
Yields moved higher on the Greek headlines, but were off the highs late in the day. The 10-year was yielding 2.43 percent, after reaching 2.47 percent earlier.
As for economic data, the retail sales number will be key and markets will focus on what it says about the consumer. The June headline sales number is expected to be up 0.3 percent, compared with a 1.2 percent gain in May. Core sales, excluding autos, gasoline and building materials are expected to be up 0.5 percent, compared with a 1 percent gain last month, according to Thomson Reuters.
"I think it should be another solid report, though not as stellar as last month," said Moody's Analytics' chief economist, Mark Zandi. "More broadly, it signals that consumers are picking up. They're starting to spend more aggressively, and I would expect more of that going forward."
Zandi said the improving jobs market and wages have helped. "There's nothing but tail winds behind the consumer," he said, noting debt loads are lower as well.
--Update - Corrects that industrials is the sector with the most outflows