US Macro Situation Still Rules Market

No bids, no bounce in stocks today: US macro situation still trumps all. The surprisingly weak July Preliminary Michigan Sentiment was the third metric that was much weaker than expected this week (Philly Fed and Empire Manufacturing were also outliers). Retail sales were also disappointing earlier in the week.

The weak Michigan Sentiment number seems to have been the final straw; remember the S&P 500 was up over 5 percent this month going into earnings on Monday, but the last three days have been flat.

Not today. We have drifted lower all day, with no buying interest. There is NOT heavy selling: we are approaching 3 billion shares on the NYSE consolidated tape (all trading in all NYSE-listed stocks), about average.

One exception: big-cap financial stocks. The XLF, the main ETF for financial stocks, already has traded nearly 80 million shares; average is 90 million.

What about the micro picture? There's been good news:

1) BP situation getting better;

2) Goldman settles;

3) macro picture looks a bit better in Europe, with stress tests coming.

No matter: the debate is no longer about a slowdown that began in June. The debate is between those who believe we have merely hit a "slow patch" and those who think we are heading for a double dip.

Earnings Season: Trading Patterns

The early trading patterns for earnings season are not particularly good. The main problem: no real follow-through, even with earnings beats (75 percent of S&P 500 companies reporting have beat earnings consensus).

The main culprits:

1) poor economic numbers, with big misses in University of Michigan Consumer Sentiment, Philly Fed, and Empire State Manufacturing;

2) signs that topline growth might be limited;

3) a strong runup going into earnings season, with many stocks up 5 percent in the week before earnings season began. _____________________________
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