Second quarter earnings are beginning to cross this week and investors are waiting for signs from corporate America that a recovery could be in the making. Shares and broad market exchange traded funds will be watched closely.
"Currently, only three sectors are expecting to report Q2 EPS growth: Industrials, Information Technology and Consumer Staples. In addition, 25 companies have reported results for Q2 thus far, with 15 beating estimates, 5 missing and five matching," S&P's Sam Stovall wrote in a recent note.
Analysts are getting ready for the worst-case scenario. Wall Street analysts are expecting S&P 500 operating EPS to drop by 0.1%, snapping back any gains or growth that has taken place.
The S&P 500 has gained about 7.7% for the year, while the Dow Jones Industrial Average has grown 4.5%. Furthermore, the Nasdaq rallied 12.7% for the year, reports Jill Schlesinger for CBS MoneyWatch.
SPDR S&P 500 ETF (SPY) was the most popular fund in June, gaining $3.60 billion in assets. SPY is a proxy for the popular S&P 500 index. Olly Ludwig for Index Universe reports that the ETF industry was strong during the second quarter, with equities and bond funds favored.
Eyes will be on the financial sector, with JPMorgan (JPM) closely watched. If JPMorgan reports a big loss, new questions and regulations may arise for the financial sector, reports Daniel Sckolnik on iStockanalyst. Bank of America (BAC) is expected to report higher earnings this quarter.
"On the surface, one could argue that this is just another example of a slowdown in global economic growth," Sam Stovall, chief equity strategist at S&P Capital IQ, wrote in a note. "On the other hand, one could say 'new quarter, old trick,' meaning that this is merely a continuation of management's efforts to guide EPS growth estimates to unrealistically low levels."
Tisha Guerrero contributed to this article.
Disclosure: I am long SPY.
Additional disclosure: Tom Lydon's clients own SPY.