Although todays downward draft was blamed on more EZ stresses, (note at day’s trough, US markets were underperforming EZ markets by over 1%), the real culprit was U.S earnings as the higher bar premise noted entering the week was the driver….(A week of such behaviour will change to stocks needing to beat and have better 2H outlooks now to have similar reactions to last week’s.). Simply what was working last week isn’t this week as weak earnings are not rallying any longer. ( DD TXN, UPS ). This is even more visible AH’s as growth/higher beta names get slaughtered after missing, (AAPL, BWLD, NFLX, TRIP). It will interesting to see if the bar gets re-set back again due to AAPL's miss particularly in tech links. All in, UPS’ call put it all (economy/earnings) into perspective as it talked of certain conditions only seen in recessions).
As bad as EZ stresses, Eco/ earnings momentum slowdown might be, it is also raising the odds of CB policy response. This in turn keeps market in its summer range. The upside risk of action is keeping a floor to the market as shorts don’t want be involved in another upward surge.