Entering today's trade, the S&P 500 is down 0.5% for the week.  Things could be better.  Then again, things could be a lot worse.  The Chinese stock market, for instance, fell 5.0% this week.

Worries abound and they are hanging over the U.S. equity market like a wet blanket.  One worry, in particular, has been the behavior of the market itself.  Rallies have not been sustained, leadership has favored mostly defensive-oriented sectors, and bad news has taken trading precedence over good news on most occasions.

Yesterday was a classic head scratcher.  Stocks were up and so were Treasuries. The Dollar Index was down and so were commodities.  Oil prices fell, yet the energy sector (+0.5%) outperformed the broader market.

Even this morning, things are a little odd.  It seems most economists these days are downbeat on economic prospects, yet G8 leaders have published their view that the world economy is gaining strength.

Basically, there isn't a lot of continuity in the marketplace right now.  Things look and sound bad one hour and then they don't the next.  Falling commodity prices are bad one day and good the next.  Small-cap stocks are the main laggards one day and the main leaders the next.

These are classic signs of a market besieged by uncertainty.  The fundamental elements of support remain in place  -- low interest rates, low inflation, and strong earnings growth -- yet they are being called into question by softening economic data and lots of headline hyperbole about Greece and sovereign debt issues in Europe.

So, there is a lot of chop in the market and a prevalent air of pessimism that makes the market's standing feel worse than it has been.  The latter perhaps is acting as a contrarian influence.  When more and more participants expect the market to go down, it often doesn't -- at least not in a straight, sharp line because short sellers often get nervous at signs of resilience and cover their positions. 

On a related note, the equity market is expected to exhibit some resilience at the start of trading.  The S&P futures are 0.4% above fair value, having digested a Fitch downgrade of Japan's credit rating outlook to negative from stable and the April Personal Income and Spending report reasonably well.

There weren't many surprises in the economic release.  The data were mostly in-line with expectations.

Personal income jumped 0.4% (Briefing.com consensus +0.4%), personal spending rose 0.4% (Briefing.com consensus +0.5%), and core PCE prices increased 0.2% (Briefing.com consensus +0.2%).

The strength in spending, however, was less strong after adjusting for inflation.  Real PCE increased just 0.1% in April on the heels of a 0.1% increase in March.

In all, the Personal Income and Spending report presented a familiar message for the market:  the consumer is still spending as job growth picks up, but is doing so with a conservative bent amid rising food and energy prices; meanwhile, core inflation is still not running hot enough (+1.0% yr/yr) to force the Fed's tightening hand sooner rather than later.

The final reading for the May University of Michigan Consumer Sentiment survey (Briefing.com consensus 72.4; prior 72.4) will be released at 9:55 a.m. ET and the Pending Home Sales report for April (Briefing.com consensus -1.4%; prior +5.1%) will follow shortly thereafter at 10:00 a.m. ET.

Beyond these reports, it could be a slow, drawn out affair on trading floors as the holiday weekend beckons.

--Patrick J. O'Hare, Briefing.com

Patrick J. O'Hare is the Chief Market Analyst for Briefing Research, Briefing.com's institutional research service. To request a free trial please email researchsales@briefing.com.