Impact of Weakening Global Macro on SPX

Part of the value in the Weekly Market Summary is to place different factors into perspective. Negative macro or sentiment are individual factors and not even the most important ones. Bear that in mind while reading on.

Macro developments in Europe and the rest of the world are worth noting, especially when weakness is creeping in while investor sentiment in the US is very bullish. A few points:

1. Global equity markets tend in the same direction. So note, EEM has diverged since the start of January and Euro 350 since the start of February. Both are down 3-4% from their high while $SPX has moved up. Both are toying with their 50-dma while $SPX is 3.6% above. Germany's $DAX is now below its 50-dma. Charts here.
2. This relationship makes sense. About 50% of $SPX earnings comes from outside the US. Europe's economy is about the same size as that of the US (both about 20% of the total). 
3. Moreover, Eurozone and US production are correlated. They can decouple but those periods do not generally persist. See first chart below. The point is, Europe is not some sideshow for US investors.
4. Half or more of OECD economies may now technically be in recession. See second chart. A recession is defined as either one or two consecutive quarters of economic contraction. The dip in the number of economies with positive growth is the first severe one since early 2008. 

Final point: this is coming at a time when S&P earnings has apparently declined the past two quarters (see here).  Factset has reduced 1Q13 earnings growth to negative 0.04% from 3%. 

Eurozone and US production are correlated. They can decouple but those periods do not generally persist. 

Half or more of OECD economies may now technically be in recession. 

Factset has reduced 1Q13 earnings growth to negative 0.04% from 3%.