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Market Close - The U.S. equity market — and the international indexes as well — were under significant selling pressure once again today after two very difficult sessions stateside to end last week for those long equities. The selling, which was mostly driven by the technology and biotech stocks last week, was a bit more encompassing today. At the closing bell, the Dow Jones Industrial Average, the NASDAQ, and the S&P 500 Index were 167, 48, and 20 points lower, respectively — though several of the indexes did work their way slightly off of earlier lows. Still, the selling was even more pronounced in the small- and mid-cap markets, which speaks volumes about the bearish mood on Wall Street today. Overall, declining issues led advancers by a hefty margin on both the Big Board and the NASDAQ.

The recent selloff comes despite some constructive data on the economy last week, including a benign report on employment from the Labor Department. Our sense is that with market valuations stretched — the Dow and the S&P 500 Index hit new all-time intraday highs last week — investors are taking profits ahead of what many pundits think will be a disappointing first-quarter earnings season, which kicks off after the close of trading tomorrow with Alcoa’s (AA) latest quarterly results. The S&P 500 Volatility Index (or VIX) jumped more than 10% in the latest session, to its highest level in three weeks. Many investors are now invoking a “flight-to-safety” strategy, with demand for fixed-income securities and some of the more-defensive oriented equity groups picking up. In fact, the yield on the 10-year Treasury note, which moves in the opposite direction to the price, fell to 2.70% today after being as high as 2.80% last week. In the same vein, there was rotation out of the riskier momentum-driven growth stocks and into the utilities and consumer staples stocks today, though even those sectors fell slightly into the red by the close. In particular, the nonalcoholic beverage stocks finished nicely higher.

From a sector perspective, it was predominately a sea of red ink. As noted, there was some mild early interest in the defensive issues, but that is where it ended for the buyers. Conversely, the consumer discretionary, industrial, and technology stocks were under heavy selling pressure. In the consumer cyclical space, shares of the entertainment production, gaming, and footwear companies were hammered.

Meantime, there will not be much in the way of U.S. economic news this week to divert the investment community’s attention away of the fast-approaching earnings season. The only data of any significance will come later in the week, with reports due on initial weekly jobless claims (Thursday) and producer (wholesale) prices and consumer sentiment (Friday). Investors also should note that the minutes from the latest Federal Open Market Committee (FOMC) meeting will be released on Wednesday afternoon. The dearth of economic news could serve to increase volatility, as it could create a vacuum of trading with the current sentiment that earnings results will disappoint in the coming weeks driving trading over the next several days. - William Ferguson

The author did not hold positions in any of the companies mentioned at the timing of this article's writing. 

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2:25 PM EDT - Apparently, the selloff, which commenced late last week has further to go on the downside. That would be the logical conclusion from today's action on Wall Street. Worries about valuations and the onset of first-quarter earnings season would seem to be the main worries, at this time.

All told, as we get into the final two hours of the initial trading day of the week, we find that the Dow Jones Industrial Average, a 160-point casualty on Friday, is off another 152 points, to near its session lows. The NASDAQ, the big loser late last week, including a 110-point reversal to end the five-day stretch, is off another 70 points. That index, which is off just over 7% from its multi-year high, is edging closer to an outright correction, which is defined as 10%, or more.

Overall, losing issues are swamping winners on both the Big Board and the NASDAQ, with many of the weaker groups again suffering big losses. The small- and mid-cap indexes, meanwhile, are being hurt proportionately more than the larger, and presumably less volatile, indexes. On point, the S&P Mid-Cap 400 is now off 27 points, 1.9%, while the Russell 2000, the principal small-cap benchmark, is plunging another 1.9% on top of last Friday's 2.6% decline. All told, the Russell is now off 6.6% from its recent yearly and all-time record highs.

There are few buyers at this time, and the lone ray of hope that many traders might have is that we will see a Monday-Tuesday reversal starting tomorrow. We shall see. - Harvey S. Katz

At the time of this article's writing, the author did not have positions in any of the companies mentioned.

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12:00 PM EDT - The U.S. stock market got off to a weak start this morning, after selling off late last week. Aside from a brief attempt earlier in the morning, so far, the major averages have not been able to reverse course to any meaningful degree. At just past noon in New York, the Dow Jones Industrial Average is off about 128 points; the broader S&P 500 Index is down 15 points; and the NASDAQ is lower by 44 points, or just over 1%. Market breadth suggests that there is underlying weakness to today’s session, as declining stocks are outnumbering advancers by roughly two to one on the NYSE. Almost all of the market sectors are trading lower. Specifically, there is notable weakness in select consumer names. Also, the industrials are off sharply. In contrast, the utilities, often seen as defensive holdings, are bucking the downtrend. Notably, this group has been picking up lately after falling out of favor last year.

Technically, the market has pressed selectively higher over the past month, pushing the S&P 500 Index into new high ground. However, there are some unsettling aspects to the current conditions. For one, the NASDAQ has been failing to keep pace with the other large averages, and that divergence is of some concern. Furthermore, there seems to be little clear leadership in the market, and this has created a choppy and directionless feel to the situation. It should be noted that while growth stocks outperformed over the past year, investors have now taken a renewed interest in the value names. It remains to be seen if this development will continue, and if this can supply the leadership needed to lift the market higher.

There were no notable economic reports released this morning. Moreover, tomorrow will be a light day, too. The lack of news may not help the situation, as traders generally do not do well with uncertainty. On Wednesday, the FOMC is set to release the minutes from its March meeting, and traders will likely be scrutinizing that report. On Thursday, the employment situation returns to the spotlight with the release of the weekly unemployment claims.

Traders did not receive much corporate news this morning. However, there has been some merger and acquisition activity to report. Specifically, Ireland-based Mallinckrodt Plc (MNK) has agreed to acquire Questcor Pharmaceuticals (QCOR), sending the latter stock higher. This may help lift some of the related the drug names, which have been lagging lately. The news will, no doubt, pick up in the coming days, as the first-quarter earnings season begins. - Adam Rosner

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.

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Stocks to Watch from The Survey Aluminum producer Alcoa (AA) is set to kick off first-quarter earnings season tomorrow after the market closes. In the meantime, however, things on the earnings front are quiet. That said, there was some M&A activity over the weekend. Most notably, shares of Questcor Pharmaceuticals (QCOR) are soaring ahead of the bell, after the biotech company agreed to be purchased by Ireland-based drugmaker Mallinckrodt for roughly $86.10 a share in cash and stock. Additionally, energy company Energen (EGN) has stuck a deal to sell its natural gas utility business to industry peer Laclede Group (LG) for approximately $1.28 billion. Investors should also note that department store retailer Sears Holdings (SHLD) has completed the spinoff of its apparel and accessories business, Lands’ End. Lands’ End will begin trading as a separate entity today. – Matthew E. Spencer 

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.

Before The Bell - The much talked about, generally feared, but, perhaps necessary, stock market correction could well be on the way. Although we have had a number of such warnings in the past and even a few reversals of note, corrections, as defined by a market drop of at least 10% in the popular averages have been few and far between over the life of this historic bull market, which is now more than five years old, and by most standards, long in the tooth.

Our sense that this time may be different reflects the sheer magnitude of the current pullback and its sudden onset. Now, save for the tech-laden NASDAQ, which is 5.6% below its recent multiyear high established earlier this year, the market is not down all that much in certain sectors. Of note, the Dow Jones Industrial Average is off just 1.3% from its all-time high, while the Standard and Poor's 500 Index is down a mere 1.7%. But the small-cap dominated Russell 2000 is now off by 5.0%. Thus, from the perspective of these two speculative and highly volatile components--the NASDAQ and the Russell 2000--the market is suddenly about half way towards a correction. 

Now, we shall see if the bearish trend spreads to the other market sectors. And thus far this morning, the news is not good, as the S&P 500 futures are off by some six points and the NASDAQ futures, still on the defensive, are down by more than 22 points in the premarket hours. These setbacks, following declines in Asia overnight and in the European bourses, especially the Frankfurt DAX, thus far this morning suggest that when trading commences here in less than an hour from now, it will do so notably to the downside.

Meanwhile, looking back, we find that the Dow Jones Industrial Average, fresh off of another all-time intraday high the day before, was down 160 points on Friday, while the tech-heavy NASDAQ, the prime casualty once more, shed 110 points, or 2.6%. That was more than two- and-a-half times the percentage decline in the Dow. The Russell 2000 also was a major casualty on Friday, falling 28 points, or 2.4%.

For the most part, this has been a move out of growth stocks, where returns can be more speculative, but also more spectacular, and into value stocks. This so-called group rotation could be a short-term phenomenon, or a move of longer duration, and, as noted, the prelude to a correction. We sense that the next few days will tell the tale of the tape. For now, though, there seems to be some suggestion in the action of the futures that the carnage could spread to other market sectors besides the biotech and Internet categories, which to date, have borne the brunt of the selling. Should the selloff start to take in the more stable and higher-yielding groups, which have thus far outperformed on the way down, the chances for a true correction would increase, in our opinion.

As to other news, the economic calendar is light this week with just Thursday's weekly jobless claims data and Friday's reports on consumer sentiment and producer prices being of some interest. This is in marked contrast to last week, when Friday brought a benign report on monthly payroll growth and the jobless rate from the Labor Department. That issuance seemingly did nothing to mollify the suddenly emboldened bears.

Finally, there is the pending start of first-quarter earnings season. And here, the early indications are not favorable, as warnings are on the way up and expectations are on the way down--and seemingly with some intensity. Thus, as we get ready to start a new and possibly volatile trading week, the news is not exactly compelling and there is little in the way of economic news that could act as a reason for the bulls to step in there. Of note, aluminum maker Alcoa (AA) will start out the profit parade, as it normally does, with its issuance after the market closes tomorrow. - Harvey S. Katz           

At the time of this article's writing, the author did not have positions in any of the companies mentioned.