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After The Close - The U.S. stock market put in a choppy, and ultimately weak, session today following yesterday’s sharp selloff. Stocks advanced slightly early this morning, turned lower after about an hour, and spent most of the afternoon working to reverse course. At the close of the session, the Dow Jones Industrial Average was off 70 points; the broader S&P 500 Index was lower by six points; and the NASDAQ slipped 17 points. Market breadth was negative, as declining stocks outweighed advancers by roughly two to one on the NYSE. However, it should be noted that these statistics were far worse yesterday, when few issues managed to advance. Further, in today’s session a few market sectors managed to make progress. There were gains in some of the consumer issues. Also, the utilities moved higher. Meanwhile, there was considerable weakness in the energy sector, as crude oil retreated. Also, the financial issues lost ground.

The market, which had been range bound for much of July, turned sharply lower yesterday. Moreover, that move was accompanied by a large swell in volume, as well as an increase in negative sentiment. Today, the bulls attempted to support equities, which was encouraging. But, ultimately, the move turned out to lack conviction. In fact, many investors were likely still trying to cut back on their equity exposure. While sentiment was much improved, compared to yesterday, many traders were still feeling risk averse. Specifically, some market participants were buying Treasuries, pushing the yield on the 10-year note down to about 2.50%. Gold also saw some buyers, as the precious metal climbed about 1%, to $1,294 an ounce.

Investors received numerous economic reports this morning. Of note, nonfarm payrolls increased by 209,000 in July, which was slightly lower than many had expected. There was no wage inflation, though. Further, the unemployment rate ticked up to 6.2% from June’s 6.1% reading. While some traders may be concerned about the mixed employment report, they may also be thinking that the Fed will be less compelled to take action sooner. Elsewhere, the ISM Manufacturing Index came in at 57.1 for July. This showing was a bit stronger than some had anticipated.

Finally, the second-quarter earnings season is now more than half over. While many of the large-cap names have reported, we will now hear from many smaller issues. However, with a few exceptions, the small companies probably won’t be able to lift the large averages too much. - 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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12:00 PM EDT - Following yesterday’s outsized losses on Wall Street, the major U.S. equity indexes are putting in another weak performance again today. The investment community is weighing concerns about the possibility that the Federal Reserve may raise interest rates earlier than initially expected, which is rarely viewed favorably by the market, against some mostly positive news on the economy both here and in China—and the former once again seems to be driving the direction of trading. Thus, as we reach the midday hour on the East Coast, the major averages—after seesawing back and forth around the neutral line for the first hour of trading—are now lower. There is still quite a negative tone to trading, as reflected in the widening gap between declining and advancing issues on both the Big Board and the NASDAQ.

Investors are still exhibiting some skittishness—though nowhere near as much as yesterday when the S&P 500 Volatility Index (or VIX) rose more than 25%--prompted by concerns that the central bank may be more prone to raise rates earlier than expected, which were stoked in recent days by hawkish comments from a Federal Reserve District President—who is a voting member on monetary policy—and some concerns that inflation is beginning to emerge at least in at the employment cost and producer (wholesale) pricing levels. Escalating violence in the Middle East and the ongoing geopolitical situation in Ukraine also have unnerved investors. Not surprisingly, investors are showing an increased appetite for the more-defensive sectors, with the consumer staples and utilities stocks in demand today. But that is where it ends, as the remaining groups are currently trading in the red, including the industrial sector, which had earlier seen some mild buying interest on some positive data on U.S. manufacturing activity (see below) and an encouraging report from China. Specifically, China’s PMI climbed to a 27-month high of 51.7 in July and China’s factories posted their strongest growth in a year-and-half.

Speaking of manufacturing activity, at 10:00 A.M. (EDT), the Institute for Supply Management, a Tempe, Arizona-based trade group, reported that U.S. manufacturing activity index rose to 57.1 last month, indicating expansion in manufacturing for the 14th straight month. Of the 18 manufacturing industries, 17 reported growth in July. The July PMI surpassed the consensus expectation and was up 1.8 percentage points from the June reading. The report, along with earlier data showing that the nation created 209,000 jobs in July, are further signs that the economy, which expanded by 4.0% in the second quarter, will remain strong over the final six months of this year.

Meantime, the earnings news was once again mostly encouraging. As we noted in our “Stocks to watch” commentary below, two Dow-30 members reported positive quarterly results today, but the shares of those two blue-chip companies are moving in opposite directions. Investors should also note that shares of LinkedIn (LNKD) are up sharply after the social media company reported its latest revenue and earnings figures. Overall, to date, the fast-concluding second-quarter earnings season has made for a positive reading. Still, it has not been enough, along with mostly encouraging economic data, to offset concerns about inflation and the impact it may have on the Federal Reserve thinking on monetary policies, and the escalating tensions in the Middle East and Eastern Europe. - William G. Ferguson

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 - Wall Street will look to put a stop to its recent slide and recoup some of yesterday’s staggering losses, with hopes that a new month holds better fortunes . However, a simple turn of the calendar will probably do little to alleviate the fears, given recent data reports and developments overseas. Instead, most will likely be paying close attention to today’s nonfarm payroll report for the month of July. That report, showed a modest 209,000-job increase in new positions last month.

Meanwhile, investors are likely to keep tabs on a few heavyweights that have reported earnings this morning. Consumer goods maker Procter & Gamble (PG -Free Procter & Gamble Stock Report) and energy company Chevron (CVX - Free Chevron Stock Report), both Dow-30 members, are of particular interest. Bally Technologies (BYI) is another name to keep an eye on. The stock is expected to open markedly higher after the gaming equipment maker announced that it is being acquired by Scientific Games (SGMS) $83.30 per share in cash.

Elsewhere, it will be interesting to see how the market reacts to Tesla Motors (TSLA). The electric car maker surprised the investment community, posting better-than-expected second-quarter results. In the same vein, the professional social networking provider LinkedIn (LNKD) handily exceeded expectations, reporting a 47% revenue increase for the second quarter. Online travel agency Expedia (EXPE) also followed suit, topping both top-line and bottom-line consensus for the June period. Shares of each were up before the opening bell this morning.

Not all the news was positive, however. Food provider Kraft Foods Group (KRFT) posted a second-quarter earnings miss due to higher meat and dairy costs. The stock was down slightly in pre-market trading. - Andre J. Costanza

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

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Before The Bell - Blame it on the Federal Reserve. Specifically, just one day after the central bank concluded its latest FOMC meeting, and following an initial tepid response to a seemingly benign meeting outcome, the market sold off abruptly, staging a wire-to-wire win for the heretofore beleaguered bears.

On point, the market was under pressure from the outset of trading yesterday, as nervous investors weighed the implications of faster economic growth and signs of rising wage inflation on the Federal Reserve's monetary policy. The genesis of this concern was Wednesday's report of a surprisingly strong second-quarter gain in GDP of 4.0%. Expectations had been for growth on the order of 3%. In truth, that number will be revised in a month, and the increase could be tapered back. But that is for another day. For now, such a vigorous advance might cause the Fed, which was vague about just when it will start to boost interest rates, to contemplate advancing such rate increases from mid-2015 to the first part of the coming year. One Federal Reserve Board member has already today championed an early 2015 date. Wall Street historically does not like rising rates, even though there is some need for such action, we believe.

Armed with these rate concerns, as well as with data showing a pickup in wage inflation, renewed banking concerns in Europe and Argentina, and with the market already at frothy levels, the incentive to take profits was clearly there. And that is just what Wall Street did, driving the market relentlessly lower throughout the day. In fact, by mid-session the Dow Jones Industrial Average had already plunged more than 200 points. It wasn't pretty. The NASDAQ, too, joined in falling by some 75 points at that time. And it would only get worse. Our sense is that stocks are vulnerable to at least a short-term selloff, although given the positive trends in both the economy and earnings, and the continuing low level of interest rates, any selloff would now figure to be fairly brief and well contained.

The market then plunged further during the afternoon, as investors debated the impact of the fast second-quarter GDP growth on the Fed. To be sure, a notable portion of that 4.0% second-quarter GDP advance was fueled by inventory accumulation, as consumer spending, albeit up from the first quarter, did not exactly take off. Our thinking is that some of this bloated inventory will be worked down in subsequent periods, most likely during the current span and the fourth quarter. So, it is logical to conclude that we will take a modest step back in the second half, with growth possibly easing into the 3% range. We expect such a moderate pace of improvement to carry over into 2015. That should be enough to spark further earnings improvement, but it likely will not be enough to get the Fed to act aggressively in tightening the monetary reins. A slow, but steady, rise in borrowing costs later next year is still our best guess.

Meanwhile, after this sharp retracement to end a generally weaker July, the stock market will now have to evaluate and act upon a pair of critical economic reports this morning (see below). Much of what the Fed will decide to do on the monetary front may be an outgrowth of the impact of these issuances, which take in the employment outlook and the scope of U.S. manufacturing activity.

As for the stock market, the Dow, after some half-hearted and ultimately unsuccessful, attempts to rebound from its worst levels of the day, wound up off by a staggering 317 points, or 1.9%; the Standard and Poor's 500 Index was lower by 39 points, or 2.0%; and the tech-laden NASDAQ had shed a disconcerting 93 points, or 2.1%. Not to be outdone, the S&P Mid-Cap 400 Index plunged 28 points, or 2.0%, while the small-cap Russell 2000 Composite dropped 27 points, or 2.3%. All told, it was a significant setback and suggests what just the hint of higher interest rates down the road can hold in store for equity investors.

Finally, in economic news that broke just minutes ago, the Labor Department reported that the nation had added 209,000 new jobs last month, which was below expectations calling for an increase of 234,000 positions, while the unemployment rate went from 6.1% in June to 6.2% in July. The jobless rate had been expected to decline to 6.0%. restraining the nation's job growth advance was an increase in private-sector payrolls of 198,000. Expectations here had been for a gain of 230,000. In June, 270,000 private jobs had been added. One slightly better trend was the increase in the nation's labor-force participation to 62.9%. Meanwhile, the total of new jobs added were revised higher for both May and June. On the whole, then, this was a reassuring report--neither too strong nor two weak. And, on cue, the equity futures, which had been off sharply rebounded notably, suggesting no worse than a mixed opening when trading resumes in a few minutes from now. Finally, in a report issued at the same time, the government indicated that consumer spending had risen by a modest 0.4% in June, while personal income had ticked higher in light fashion.

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

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