Stocks backtracked almost 1% last week in quiet trading, mainly on profit-taking and short-lived jitters caused by reports that a relatively small European banking firm missed debt payments. For a few moments last Thursday, it looked like a Greek banking crisis redux.

Riskier small caps took the brunt of the beat-down, suggesting the return of the “risk off” trade. But the drop likely had more to do with a minor reversal—so far—of end-of-second-quarter capital flows into small-cap stocks, and profit-taking from record highs reached the previous week. Nervousness about the European banking sector reemerged briefly Thursday morning after news reports said Portuguese conglomerate Espírito Santo International—the largest shareholder in the parent of Portugal’s largest bank, Banco Espírito Santo (ticker: BKESY)—missed a debt payment. Stocks pared the losses Friday.

With the 64-month-old bull market not far from all-time highs, investors will be better served by focusing on U.S. shores in coming weeks as second-quarter earnings tumble out in bunches from the likes of JPMorgan Chase(JPM), Intel (INTC), Johnson & Johnson (JNJ), and Google(GOOGL), among others in the Standard & Poor’s 500 index.

Despite the contraction in U.S. gross domestic product in the first quarter, there’s a basic market assumption that the economy is on a growth track, if a slow one, says Richard Weeks, partner at HighTower Advisors., as many assume, he adds.

Last week, the Dow Jones Industrial Average fell 0.7% or 125 points to 16,943.81, and the S&P 500 lost 18 or 0.9%, to 1967.57. The Nasdaq Composite index dropped 1.6%, or 70, to 4415.49. The Russell 2000 index fell 4% to 1159.93.

At the Federal Reserve’s Open Market Committee meetings last week, the Fed reaffirmed that its bond-buying monetary stimulus will wind down in October.

A U.S. economic recovery is taken for granted, says Michael Shaoul, chairman of Marketfield Asset Management. U.S. companies, by dint of keeping a tight lid on labor and capital expenditures, have produced growing earnings. To the extent there are negative second-quarter profit surprises, perhaps caused by labor or capital capacity constraints, it will lead to choppy action in the market in the near term, he says. The bull “needs good corporate data.”

Eventually, this market is going to correct and it’s not likely to be the result of woes at a small bank in a small country on the edge of Europe.

(Source: Barrons Online)

The past week saw the stock-market debut of a company called GoPro, which makes video cameras you can strap to your head. If investors strapped cameras to their heads to film the highs and lows of finance last week, no one would watch.

Trading remains subdued, and stocks mostly treaded water. The Dow Jones Industrials and Standard & Poor’s 500 fell slightly on the week, in reaction to more hawkish banter by Federal Reserve officials. The talk suggests the central bank might raise interest rates as soon as the first quarter of 2015, slightly earlier than investors have been expecting.

After closing at a new record high the previous Friday, the Dow finished the week down 0.6%, or 95 points, to 16,851.84. The S&P 500 index fell 1.9 points, to 1960.97. The Nasdaq Composite added 30 points, or 0.7%, to close at 4397.93.

Not even a miserable first-quarter reading on gross domestic product shook the market out of the doldrums. “It was horrific, worse than anyone expected,” Yousef Abbasi, global market strategist at JonesTrading Institutional Services, said of the 2.9% decline in first-quarter economic output. “But we were very quickly willing to excuse it.”

Abbasi focused instead on statements by Fed officials such as James Bullard, who indicated the Fed might raise interest rates in the first quarter of 2015. Bullard, president of the St. Louis Fed, doesn’t vote on the Federal Open Market Committee, the Fed’s policy-making arm, but he and other Fed officials appear to be more worried about an uptick in inflation than Fed Chair Janet Yellen, who dismissed the data as “noisy” the previous week.

Other data buoyed the Street. New-home sales spiked 18.6% in May, the largest gain in more than 20 years. Consumer-sentiment data released Friday was rosier than expected.

Investors await second-quarter results for more guidance. Quarterly results from S&P 500 companies such as General Mills (ticker: GIS) and Oracle (ORCL) have mostly proven uninspiring, says Zacks Investment Research. “These initial reports don’t inspire much confidence and appear to be pointing toward another underwhelming reporting season ahead,” wrote research director Sheraz Milan, while noting that it may be “premature to draw any firm conclusions.”

Nike (NKE), bucked the tide, however, by posting better-than-expected earnings late Thursday, seeing particular growth in its soccer division, where revenue rose 18%. It was a fitting end to a week when the U.S. men’s soccer team shocked most of the world by advancing in the World Cup.

Trading is likely to remain slow in the coming holiday-shortened week.

“The big players are all on vacation,” said Brad McMillan, chief investment officer for the Commonwealth Financial Network. “Keep an eye on any news that companies release on July 3. It will probably be something they want to bury.”

(Source: Barrons Online)