Monday Market Note: Investors' Anxiety over Recovery (Somewhat) Soothed

Stocks gained ground on the week, closing on Friday at nearly the precise place where they started the year. The catalyst was corporate earnings, which were better than expected.

Investors are beginning to consider that there will be enough growth in the second half of the year to maintain the economic recovery.

Nerves were also soothed when the results of the European bank stress tests were better than anticipated: 7 of 91 banks failed, although the tests appeared to be rigged, or at the very least flawed, because they didn't measure the risk of a sovereign default. How would these banks do if a country like Greece defaulted? That answer will have to wait ...

Speaking of banks, in the U.S., bank failures broke through a sobering threshold: More than 100 bank failures in this year. Over the weekend, the FDIC closed 7 banks, bringing total bank failures for 2010 to 103. In 2007, there were only 3 bank failures; in 2008, there were 25; and last year, there were 140.

Experts believe that we are on pace to see more than 200 bank failures this year.

Investors have probably factored this into the recovery story already, so bank failures don't tend to have much impact on markets.

Here's where the indexes stand:

• DJIA: 10,424, up 3.24% on week, down 0.03% YTD

• S&P 500: 1102, up 3.55% on week, down 1.12% YTD

• NASDAQ: 2269, up 4.15% on week, up 0.01 % YTD

• September Crude Oil: $78.98, up 3.4% on week

• August Gold: $1188.20

This morning, Asian shares are trading higher on the back of U.S. earnings, while European stocks are mixed.

On tap this week: More corporate earnings (BP, Boeing, Exxon Mobil and Merck); housing data; and the first estimate on Q2 GDP.

In a sign that the recovery is slowing, GDP growth is expected to be 2.5%, down from last quarter's 2.7% and well below the Fed's 2010 estimate of 3.1-3.5%.