Surprise! Stocks up 8% at half-year mark

For all the scary headlines -- a bailout of Spanish banks, JPMorgan's huge trading loss, the sputtering job market, Facebook's failed initial public offering -- it's a wonder stocks aren't down more this year.

Actually, stocks aren't down. That was a trick sentence. At the halfway mark for 2012, stocks are up more than 8 percent.

"People think we're down because memories are short," says Rex Macey, chief investment officer at Wilmington Trust Investment Advisors. "It feels like the market's been worse than it actually has."

The year began with investors focusing on corporate America's record profits and scooping up stocks. The Standard & Poor's 500 surged 12 percent from January through March.

It looked like that gain might be wiped out in the second quarter. Investors worried about Europe's inability to find a lasting solution to its debt crisis and about slower job growth in the United States.

Then came Friday: European leaders announced a broad strategy to funnel money into failing banks and keep borrowing costs down for governments, and stocks soared around the world.

It all left the S&P 500 up a healthy 8.3 percent for the year.

What happens next probably will depend on corporate earnings again. For April through June, earnings are expected to fall 0.7 percent from a year ago, according to S&P Capital IQ, a research firm.

So far, though, stocks in the United States are trouncing those in many countries. European markets are nearly all down this year, and several are down more than 10 percent. And many big emerging markets are struggling. China is down 1 percent, Russia 7 percent and Brazil 14 percent.

The backdrop is a darkening economic picture. China's economy is slowing, consumer confidence in the United States has sunk for four straight months, and a report Friday is expected to show a fourth straight month of weak job growth.

As if that weren't bad enough, U.S. companies, from retailers to consumer-goods makers to technology firms, are talking down investor expectations of how much they'll earn over the next several months, and that's sinking stocks.

In mid-June, defense contractor AAR dropped 11 percent after cutting its outlook. Then Philip Morris fell 3 percent after it trimmed earnings estimates.