It was yet another good week last week for the stock market, but more to the point, it was another good week for the broader stock market. Every stock did not go up, but collectively, most stocks did, which was reflected in the 2.4% gain in the Invesco S&P 500 Equal-Weight ETF (RSP).<\/p>\n\n\n\n
Where we sit at the end of this week will be interesting to see because this week will feature a ramp in Q2 earnings reporting, insight on the housing market, and retail sales activity in June.<\/p>\n\n\n\n
For the time being, the equity futures market is idling, governed by a wait-and-see mentality, not only with respect to what the rest of the week will bring but what today will bring in terms of price action.<\/p>\n\n\n\n
The S&P 500 futures are down five points and are trading 0.1% below fair value, the Nasdaq 100 futures are up nine points and are trading 0.1% above fair value, and the Dow Jones Industrial Average futures are down 78 points and are trading 0.2% below fair value.<\/p>\n\n\n\n
Some reports are highlighting the Q2 GDP report out of China that was weaker than expected on a year-over-year basis as the basis for this morning’s halting action in the equity futures market. We’d call that an ostensible excuse for the lack of buying interest.<\/p>\n\n\n\n
Traders want to see what unfolds with market pricing this week knowing that stocks have been on a tear, riding the notion that the economy can avoid a hard landing, that the Fed is close to being done with its rate hikes, and that the guidance coming out of the earnings reporting period will substantiate analysts’ expectations for renewed earnings growth in the second half of the year.<\/p>\n\n\n\n
That view has translated into stretched valuations for a number of stocks and for the market cap-weighted S&P 500. Said another way, a lot of good news has been priced into stocks already, meaning the bar of earnings expectations is on the higher side even though the blended Q2 earnings growth estimate calls for a 7.5% year-over-year decline in S&P 500 earnings, according to FactSet.<\/p>\n\n\n\n