In the wake of Friday's disappointing jobs report, the equity market fared much better than most people expected.  The S&P 500 finished off its lows and slipped just 0.7% after gaining as much as 6.9% over the previous eight sessions.  Today, though, it is back to fear and loathing.

Debt limit negotiations over the weekend produced nothing other than the same ideological defenses that had produced nothing going into the weekend. 

China's consumer inflation rate was reported to be up 6.4% year-over year in June versus 5.5% in May, prompting a belief that more interest rate hikes will be forthcoming to cool down China's economy. 

And Italy has now emerged on the scene as the newest hot spot for Europe's debt/fiscal crisis.

Concerns about Italy were present on Friday, but with inflammatory reports this morning suggesting EU leaders are holding emergency discussions about Italy at the same time they are trying to figure out a second bailout plan for Greece, market participants are in a sell first, ask questions later frame of mind.

The S&P futures are 1.2% below fair value, so it is expected to be a straight shot lower when trading begins.

There will be a lot on the market's plate this week, not the least of which are rising bond yields and falling equity markets in Europe that are being driven by contagion worries.  The fact that Italy now appears to be in the crosshairs of bond vigilantes kicks things up several notches in the uncertainty department relative to Greece given that Italy is Europe's third largest economy and since banks in the U.S. and Europe have much more exposure to Italy.

Uncertainty, then, is the wet blanket covering the market at this juncture and macro issues are taking precedence on the reporting front.  This is an interesting dynamic leading up to the start of the second quarter earnings reporting season, which begins with Alcoa's (AA) report after the close today.

The earnings reporting goes into full swing next week, so we will soon see if fundamental company information can supplant the macro headlines as the key market driver. 

Second quarter operating earnings are projected to increase 14%, but this reporting period has the potential to be a bit messy relative to recent periods knowing companies have a lot of excuses on which to blame any disappointments.  The guidance will be key, though. 

In general, we think companies will be somewhat conservative with their guidance, widening their estimate ranges perhaps around current consensus estimates to account for the macro uncertainty while also allowing for positive surprises.  Such a stance might not be convincing enough, however, to redirect the market's attention from other issues, meaning we could see more trading chop in the coming weeks.

This week will also be accented with testimony on the economy from Fed Chairman Bernanke on Wednesday and Thursday and key economic reports in the form of the Initial Claims, Retail Sales, PPI, CPI, and Industrial Production reports at the end of the week.

There are no economic releases today.  What there is today is more uncertainty that is standing in the way of advancing stock prices.

--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.