"NEW YORK—For all the scary headlines -- a bailout of Spanish banks,JPMorgan's huge trading loss, the sputtering job market, Facebook's failed initial public offering -- it's a wonder stocks aren't down more this year.
"People think we're down because memories are short," says Rex Macey, chief investment officer at Wilmington Trust Investment Advisors. "It feels like the market's been worse than it actually has."
The year began with investors focusing on corporate America's record profits and scooping up stocks. The Standard & Poor's 500 index surged 12 percent from January through March.
It looked like that gain might be wiped out in the second quarter. Investors worried about Europe's inability to find a lasting solution to its debt crisis and about slower job growth in the United States.
Then came Friday: European leaders announced a broad strategy to funnel money into failing banks and keep borrowing costs down for governments, and stocks soared around the world.
It all left the S&P 500 up a healthy 8.3 percent for the year.
What happens next will probably depend on corporate earnings again. For April through June, they are expected to fall 0.7 percent from a year ago, according to S&P Capital IQ, a research firm. That would be the first drop in nearly three years.
So far, though, stocks in the U.S. are trouncing those in many countries. European markets are nearly all down this year, and several are down more than 10 percent. And many big emerging markets are struggling. China is down 1 percent, Russia 7 percent and Brazil 14 percent.
The backdrop is a darkening economic picture. China's economy is slowing, consumer confidence in the U.S. has sunk for four straight months, and a report next Friday is expected to show a fourth straight month of weak job growth.
As if that weren't bad enough, U.S. companies, from retailers to consumer goods makers to technology firms, are talking down investor expectations for how much they'll earn over the next several months, and that is sinking their stocks."