Market Preview: Nowhere to Hide

NEW YORK (TheStreet) -- It's hard to be bullish about stocks at the moment. Even if you go big picture and try to filter out the day-to-day noise from abroad.

The rally that began June was mostly Fed-fueled but after last week's policy meeting, the prospect of more quantitative easing is effectively off the table for summer, so no soap there. Most of the economic data of late -- May new home sales not withstanding -- has been underwhelming, and the dreaded R word, recession, is starting to crop up again. No good.

What about corporate profits? Well, the upcoming earnings season isn't likely to be anything special. According to the latest data from Thomson Reuters, analysts are currently looking for growth of 6.3% from the S&P 500 for the second quarter, down from a growth estimate of 9.2% on April 1.

And then there's Europe, which has been in one step forward, two steps back mode for more than three years now. Monday's ugly sell-off didn't have a single, overarching catalyst. It was more the product of a collective realization that there's no reason to believe this coming summit of Europe's leaders is going to any different than the umpteen summits before it.

After the bell, Moody's downgraded a slew of Spanish banks, so the negative headlines from across the pond are already piling up for tomorrow.

Aside from Wal-Mart Stores -- the only Dow component to book a gain on the day -- there was nowhere to hide on Monday. It was a broad decline, a flood of sell orders that sank nearly all boats. The valuation argument still carries some water for stocks -- the S&P 500 was trading at a forward price-to-earnings multiple of 12.8X as of Friday's close and it's even cheaper now -- but it takes real conviction to stick with that belief when the entire quote screen is bathed in red.

Sam Stovall, chief equity strategist at S&P Capital IQ, explained early Monday that the all or nothing trend has become a fact of life for U.S. equities of late.

"Thus far in 2012, investors have had to endure extremes of emotions, as the S&P 500 rose nearly 13% year-to-date through April 2, only to fall nearly 10% as of June 1," he wrote. "The market is still 6% above its 2011 close, but investors have paid for this advance with elevated volatility."

He noted that the S&P 500 has fallen by 2% or more in a single session 21 times in the past 12 months, compared to an average of 15 times since 2000 and five since 1960. Because of that, he argued that investors need to work that much harder to stay the course with regard to their long-term goals.

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