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After The Close - The U.S. market headed lower this morning, but managed to reverse course partially. At the end of the session, none of the major averages was able to show a gain. The Dow Jones Industrial Average finished off five points; the broader S&P 500 Index was down four points; and the NASDAQ was off 20 points. Market breadth was negative, as declining issues were ahead of advancers by a narrow margin on the NYSE. The market sectors were mixed. There was some relative strength in the basic materials issues, as this area of the market received some strength from the chemicals issues. In addition, there was some strength in the consumer names. However, the energy issues were weak today, and the utilities, which had firmed up in recent weeks, also traded lower.

Technically, stocks have pulled back over the past few weeks, and have yet to find any meaningful support. Yesterday’s move, while a respectable rally attempt, did not really exhibit a firm commitment to equities on the part of the bulls. Volumes did pick up, but were not overwhelming. Today’s mixed-to-weaker showing further suggested a lack of clear direction, as some traders likely used bounces to actually exit stocks. This behavior, which is characteristic of weak markets, makes it hard for rallies to gain steam. The VIX, was slightly higher at just under 20 today, and that suggests that sentiment was mixed.

Once again there was not too much economic news released today. The employment situation looked a bit unimpressive, as the ADP employment report showed 175,000 private sector jobs added to the economy in January. This result was just shy of forecasts. We get more information on the jobs situation on Friday, when we receive the government’s January employment report. Elsewhere, the ISM non-manufacturing index came in with a reading of 54 for January, which was just a bit better than the consensus view, and also a slight improvement from December’s figure.

Finally, traders received a few more earnings reports to digest. Of note, in the drug area, Merck (MRK - Free Merck Stock Report)issued mixed results, but that stock was up a bit. Also, GlaxoSmithKline (GSK) shares were up, after the drug giant issued decent figures.   - Adarm 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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12:05 PM EST - The major U.S. equity market averages started the session lower this morning, briefly tried to make their way back to the neutral line on a fairly positive report on the nonmanufacturing sector (more below), but the bears kept throwing counter jabs to keep the bulls at bay. Thus, as we reach the midday hour on the East Coast, the major indexes, most notably the NASDAQ, Russell 2000, and the S&P Mid-Cap 400, are toiling in the red—though the Dow Jones Industrials are putting up the best fight in paring its losses. Still, today’s performance suggests that yesterday’s showing for the U.S. equity market may have been a “dead cat” bounce, which we had indicated throughout yesterday’s session might be the case.

Investors should note the wide margin between declining and advancing issues, which underscores the definitive negative tone to trading. Losing issues currently hold a decisive lead on both the Big Board and the NASDAQ. There are no places right now for investors to turn to in the equity market, as all of the top-10 sectors are in negative territory, even the more defensive groups.

Today’s news on the economy was certainly not enough to calm a recently unnerved investor. A half hour into the trading session, the Institute for Supply Management (ISM) reported that nonmanufacturing activity for the month of January came in at 54.0, which was a fairly positive reading as it beat both the December figure and the consensus expectation. However, that reading was somewhat offset by another lackluster report on the labor market. Specifically, payroll processing giant Automatic Data Processing (ADP) reported at 8:15 A.M. (EST) that 175,000 private-sector jobs were created in January, which was roughly 20,000 below the consensus expectation. Overall, the economic news of late, including December’s nonfarm payroll report from the Labor Department and Monday’s manufacturing data from ISM, has been rather uninspiring. This, along with a lackluster earnings season to date has given investors the impetus to take profits in a market that entered 2014 overbought.

The economy will remain a big part of the investment community’s focus over the few days, with data still to come on the trade gap (tomorrow) and employment and unemployment (Friday). The latter report has the potential to be a real market mover. Another thing to ponder, is what impact the severe winter weather that blanked a good portion of the United States in recent months, will have on first-quarter production. Our sense is that investors are fearing that it could slow growth in the initial quarter of 2014, and impact top-line growth at many of the nation’s industrial and retail companies. The latter issue is a bit disconcerting as recent quarterly reports from Corporate America have not may for great reading from a revenue perspective.

Speaking of Corporate America, we did get some noteworthy earnings news today. Dow-30 component Merck & Co. (MRK Free Merck Stock Report) reported lackluster net profits, as generic competition remains fierce. However, shares of the drug making giant are up on the potential of some recent cancer-drug deals. The same can’t be said for the stock of fellow healthcare company Humana (HUM), which is down on a weak fourth-quarter showing. Nevertheless, the stocks of those companies that have reported earnings within the last 24 hours, including TimeWarner (TWX), and Myriad Genetics (MYGL), are performing relatively well today, and overcoming the overall weak market sentiment. The same can’t be said for Buffalo Wild Wings (BWLD), which plunged on a top-line miss in its latest quarter. Staying in the corporate area, the stocks of CVS Caremark (CVS) and Walgreen (WAG) are being looked at by traders after the former announced that it plans to discontinue sales of all tobacco products at its stores by October 1st. The stocks of the tobacco manufacturers, including Philip Morris (PM), Reynolds American (RAI), and Lorillard (LO), are only trading modestly lower today, as most analysts feel that the CVS decision will have little-to-no impact on the tobacco companies.

Looking ahead to the remainder of the session, we think it will take a big effort on the part of the bulls to knock the bears out of the driver’s seat, especially after a fairly positive report on the services sector failed to ignite much buying on Wall Street. The noted spread between declining and advancing issues and the more pronounced losses on the small- and mid-cap markets seem to be indicating another victory may be in the cards for the emboldened bears. Stay tuned.  - 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 SurveyStocks looked poised to open slightly higher today, likely helped by earnings news, much of which appears favorable. Indeed, shares of drugmaker and Dow-30 component Merck (MRKFree Merck Stock Report), restaurant operator Buffalo Wild Wings (BWLD), media and entertainment company Time Warner (TWX), financial services provider Genworth Financial (GNW), biotech Myriad Genetics (MYGN), and cosmetics maker Estee Lauder (EL) are all moving higher ahead of the bell after reporting December-period results, with MYGN stock is showing considerable strength. – 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 stock market, which suffered one of its more severe reversals over the past year on Monday, turned the corner to a modest degree yesterday, in what we have come to term a Monday-Tuesday reversal. It wasn't dramatic, to be sure, but after Monday's eye-opening decline, even a partial snapback was welcome.  

As noted, nowhere near all of the damage was undone. After all, the Dow Jones Industrial Average had sustained a 326-point drop to start the week, while the tech-heavy NASDAQ had given back a gut wrenching 107 points. Still, after opening yesterday's session higher, and save for a brief early dip into negative territory, stocks stayed nicely on the plus side throughout the session, finally ending the day with solid gains in the major equity averages and a good showing by the small- and mid-cap benchmarks, including the Russell 2000 and the Standard & Poor's Mid-Cap 400. About a quarter to a third of the damage done on Monday was reversed, in a restrained comeback that was, nevertheless, encouraging and sorely needed by the recently chastened stock market bulls. 

In partially coming back yesterday, we have for now, at least, delayed the much-talked-about correction, which is defined as a 10% drop in the leading averages. Things are not as rosy overseas, where Japan's Nikkei 225 and Hong Kong's Hang Seng Index both have sustained losses of more than 10%, while the market indexes across the emerging world are in serious reversals themselves. Over here, a much more benign economic outlook has held such steep losses at bay.

Meanwhile, it was a good day to be long equities for a change, with almost all of the major groups posting gains, led by some of the industrial giants that had been major participants to the downside, such as Dow-30 components 3M Company (MMM - Free 3M Stock Report), the diverse manufacturer, and DuPont (DD - Free DuPont Stock Report), the chemicals giant. Both stocks scored relatively large gains yesterday.

Not all asset categories saw strength yesterday, as gold prices traded lower following recent gains, while Treasury notes and bonds dipped, as well, with yields heading higher after further setbacks the day before. Gold, meantime, is heading higher this morning. As to the economy, there was a paucity of news in the latest session; but that will change today when the Institute for Supply Management reports on non-manufacturing activity at 10 (EST) this morning. A report on manufacturing in January from that same trade group issued on Monday had helped to exacerbate the downturn in our markets. Expectations are that this latest metric will show little month-to-month change. All of this is just a prelude, meanwhile, to the most critical issuance of the month, when the Labor Department reports on January job growth and the accompanying unemployment rate. That report, based on two separate surveys, will be released Friday morning at 8:30 (EST). It often can be a market mover of note.

As to other influences, earnings are still coming out in force, with many companies, both large and small, due to issue their latest quarterly results over the next couple of weeks. Thus far, earnings season has been more of a mixed affair than not, and such an underwhelming performance, along with softer recent economic tidings, have helped to pressure stocks on our shores. However, the big downward influence has been the well-chronicled emerging market equity and currency woes. Concerns about growth in Japan and China haven also periodically unnerved investors over here.        

Finally, we look ahead to a new day on Wall Street, after a mixed session overnight in Asia, with the Nikkei showing some rare strength, and generally higher prices in Europe this morning, despite the report of a sharp retreat in euro-zone retail sales in December. Over here, however, our futures are implying a sharply lower opening on Wall Street when trading resumes in less than an hour from now. It is likely that the non-manufacturing report will have some influence on the week's trading, as will tomorrow's data on the international trade balance. But the big issuance, and a potential market-moving report of some consequence figures to be Friday's aforementioned employment release from the Labor Department. Of note, the ADP (ADP) private-sector jobs report issued at 8:15 (EST) this morning showed that 175,000 payrolls had been added in January, some 20,000 less than forecast. – Harvey S. Katz

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