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The stock market has erased most of the early summer losses and is now within striking distance of the spring high. While the gains earlier on were concentrated largely in defensive and counter cyclical stocks, the momentum seems to have broadened a bit following the Friday jobs report. But the gains lack in conviction, as the small caps have lagged the large-caps -- likely a reflection that the market remains ambivalent about the economic and Fed policy outlook.

We will not get any clarity on those fronts given the dearth of economic reports this week. But the clamor for more Fed support does not seem to have died down following the July jobs report as indicated by the Boston Fed President’s interview with the Wall Street Journal, where he advocates for an open-ended new round of bond purchases by the central bank.
Eric Rosengren, the Boston Fed chief, does not have a vote on the FOMC, but his policy stance is a reflection of others like New York President Bill Dudley and Fed vice chairwoman Janet Yellen, who do have votes.

We will get more clarity over this debate within the FOMC later this month at the Fed’s annual Jackson Hole huddle. Bernanke had used the Jackson Hole platform in 2010 to telegraph his QE2 plans in 2011. We will have another monthly jobs report and a host of other economic indicators before the Fed’s next scheduled meeting on September 12 and 13th.

The Fed aside, we are in the last stretch of second quarter reporting season, with Disney (DIS - Free Report) and Priceline ( on tap to report results after the close today.

Of this morning’s basket of results, CVS Caremark’s ((CVS - Free Report) report incorporated the two key elements that we have seen repeatedly this earnings season – two thirds of the companies have beaten earnings expectations, but more than 60% have fallen short on the revenue side. In fairness to CVS, however, the drug store chain guided higher while many others have done the opposite. Beer maker Molson Coors ((TAP - Free Report) beat earnings and revenue expectations this morning.

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