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Fed speak, trade war and corporate earnings to hog market attention
MAJOR US indexes finished more or less flat for the second straight week - amid volatility.
Every reminder of tariffs slowing business activity drags stocks downwards. Every reminder of a strong US consumer and central-bank stimulus sends them flying towards the skies.
The waves of volatility should subside somewhat this week, unless the ongoing trade war, the US Federal Reserve meeting minutes and General Electric's (GE) struggles create more ripples.
The first powerful rally came last Tuesday after US President Donald Trump unexpectedly delayed tariffs on a range of Chinese imports until after the crucial holiday-shopping period. It was a concession both to China and US shoppers.
"The relief on tariffs was very much targeted at items that the US consumer will be purchasing in size going into the back-to-school and holiday season, including laptops, videogame consoles and smartphones," said Michael Arone, chief investment strategist at the US SPDR unit of State Street Global Advisors. "It was done with intent, in order to relieve the potential negative impact on the US consumer."
The rally was followed by the biggest decline of the year so far last Wednesday - with the Dow Jones Industrial Average plunging 800 points, or 3 per cent - after China appeared to swat away the olive branch from Mr Trump and hunker down for a prolonged conflict.
China's war-like posture coincided with a round of economic data that read like a trade-war roll of the dead.
Stock losses were led by multinational miners and manufacturers, reeling from reports that Chinese industrial production had slowed and Germany had logged a quarter of negative economic growth. The price of metals such as copper and agricultural products such as pork plunged.
The American consumer has become the bulwark of the US economy and stock market. American shoppers increased spending by 0.7 per cent in July, according to the Commerce Department, as Amazon's Prime Day inspired copycat promotions and created "Black Friday in July".
Walmart was among the beneficiaries of the burst of mid-summer spending. The world's largest retailer by sales posted surprisingly strong second-quarter sales growth, helped by a rapidly growing digital presence.
But stores that don't have as high a profile online, including Macy's and JCPenney, told a familiar tale of dwindling traffic in their earnings reports.
Target and Nordstrom will report updates this week.
The other great hope for the bulls is central-bank intervention. One European Central Bank official, Olli Rehn, gave an unusual interview with The Wall Street Journal last week, in which he sounded like a doting father and promised the stock market every manner of treats.
This week, investors in US stocks may get a slightly less effusive set of promises from Wednesday's Fed minutes. The US central bank has a more confusing picture.
"US data releases indicate continued divergence between the industrial and consumer sectors of the US economy," said economists at brokerage Nomura Securities.
"The strong retail sales report and healthy builders' survey suggest that the downdrafts from trade, weakness abroad and energy remain, largely, within the industrial sector."
The idea is that a series of drawn-out geopolitical dramas - the trade war, Brexit, China's growth struggles - have made long-term business planning impossible, freezing capital outlays.
Weak business spending is already showing up in US data, and economists say the only thing keeping growth going is the consumer.
Economists at brokerage Goldman Sachs have warned that odds of a recession are rising. Bank of America Merrill Lynch Global Research economists now assign a one-in-three chance of a recession.
"The economy has been slowing consistently since the middle of last year's benefits from huge fiscal policy package started to diminish and the Fed continued its tightening," said Mr Arone.
Last week, shares of GE fell sharply after Harry Markopolos, the forensic accountant who first pointed to irregularities in Bernard Madoff's operations, accused the conglomerate of playing fast and loose with the numbers.
The pressure from Mr Markopolos' claims will make any market storm even tougher for GE to ride out.