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The Tell: Why stock-market investors might soon find ‘bad news’ is no longer ‘good news’

Investors treating bad news like good news—and vice versa—is the narrative shorthand of the moment when it comes to explaining daily stock-market moves, but the looming second-quarter U.S. earnings reporting season could soon change the equation, one analyst warned Tuesday.

The good-news-is-bad-news version of the phenomenon was on display last Friday after a stronger-than-expected U.S. June jobs report triggered a modest stock-market pullback as investors scaled back the scope of expected interest-rate cuts by the Federal Reserve.

Ahead of the data, investors had pushed all three major U.S. stock indexes — the S&P 500 SPX, +0.00% the Dow Jones Industrial DJIA, -0.21% and the Nasdaq Composite COMP, +0.43% — to record finishes last Wednesday, with buying enthusiasm attributed to enthusiasm for aggressive Fed monetary easing after recent weak economic data.

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