After The Close - The first trading week of February did not lack drama. The five-day stretch started off well to the downside, highlighted by the 326-point drop in the Dow Jones Industrial Average and more-than-100-point setback for the NASDAQ on Monday, and had market pundits thinking we might be headed for a market correction, which is historically seen as a 10% decline in the major indexes.  However, the market quickly steadied and then proceeded to work its way back to the neutral line for much of the following four days of trading. Finally, with a strong showing on Wall Street again today (more below), the major large-cap averages actually eked out small gains for the week. It was a remarkable turnaround, as the rally did not get much help from the business beat over the final two days, but some encouraging earnings reports from Corporate America did help the cause of the bulls.

Today’s strong market performance, in which the Dow Jones Industrials, the tech-heavy NASDAQ, and the broader S&P 500 Index added 166, 69, and 24 points, respectively, was primarily driven by positive earnings news. In that regard, some of today’s big winners were Activision Blizzard (ATVI), Athenahealth (ATHN), and Expedia (EXPD). Conversely, shares of LinkedIn (LNKD) fell on a weaker-than-expected quarterly showing. Meantime, the stocks of industry giants Apple (AAPL) and General Dynamics (GD) rose on reports that the companies are buying back shares. The former company recently has been publically pressured by activist investor Carl Icahn to enhance shareholder value via such buybacks.

Meantime, investors seemed to shrug off another less-than-stellar report on the labor market. Specifically, the Labor Department reported that 113,000 new jobs were created last month, which fell well short of the consensus expectation. Too, December’s jobs creation figure was only revised from 74,000 to 75,000. Our sense is that investors may be thinking that hiring was negatively affected by severe winter weather throughout much of the country. The unemployment rate also fell to 6.6% from 6.7% and investors may have been encouraged by the slight increase in the labor participation rate. Moreover, investors had to like the 48,000 increase in construction jobs, which may be a sign that the housing market continues to strengthen—and that would be a good sign for the economy.

From a sector perspective, there was much to like, as all of the 10 major groups finished comfortably in positive territory. Leadership came from the industrial, basic materials, and healthcare groups. Within the former two sectors, there was notable strength in the precious metals and mining, aerospace and defense, and transportation (i.e. railroads) stocks. Likewise,  the price of crude oil, which rose above $100 a barrel before settling just under the century mark at the close of trading on the New York Mercantile Exchange, found support from a rally in U.S. equities and a steady climb in demand for heating supplies.

Looking ahead to next week, the major equity indexes may start the five-day stretch looking for some direction, as the economic news will be light early in the week and the earnings news, though still considerable, will clearly lack the headline grabbers. In fact, Cisco Systems (CSCO - Free Cisco Stock Report) is the only Dow-30 company scheduled to report quarterly results next week. Other notable companies scheduled to report earnings are PepsiCo (PEP), Campbell Soup (CPB), and V.F. Corp. (VFC). Meanwhile, the only major news on the economy will come later in the week, with the latest data on retail sales and industrial production due on Thursday and Friday, respectively. The retail sales data could make for a dour reading, as the noted severe winter weather that has blanketed a sizable portion of the country, may hurt sales at some of the retailing companies.

All in all, the latest five-day stretch should be viewed as constructive for those long equities, as the buyers were confident enough to step in with some vigor when market fundamentals were showing signs of eroding. Investors, though, should note that the both the small- and mid-cap indexes actually finished lower for the week, a sign that not everybody was aboard the latest push higher and that weakness could thus quickly return if the news were to sour.   - William G. Ferguson

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


12:15 PM EST - The U.S. stock market is trading higher today, as traders look to extend yesterday’s gains. All the major averages are making strides, which is encouraging. At past noon in New York, the Dow Jones Industrial Average is up 100 points; the broader S&P 500 Index is higher by 15 points; and the NASDAQ, which is displaying leadership, is ahead 49 points, a better-than-1% advance. Today’s move is fairly broad based, as advancing stocks are outweighing decliners by almost three to one on the NYSE. Further, all of the market sectors are making contributions. We are seeing strength in the healthcare names, and the industrials are doing well, too. Meanwhile, the financials, while modestly higher, are lagging the other equity sectors.

Technically, the market, after pulling back in late January, has been looking for some support. Yesterday’s big move up was impressive, showing that the bargain hunters and bulls are not to be counted out just yet. We will still need to see some additional buying to suggest that sentiment has shifted, clearing the way for another market advance. The mood is turning more bullish, as the VIX is about 10% lower to just under 15.5 today.

Traders received some important economic news this morning. Specifically, non-farm payrolls rose by 113,000 positions in January, which was weaker than the 185,000 many had expected. However, the unemployment rate came in at 6.6%, which was a slight drop. The market is taking the somewhat disappointing release quite well. Some traders may think that sluggish economic data will prompt the Fed to slow down the tapering of asset purchases. However, such action will not likely be the case and waffling on the part of the Fed on this issue might even send a confused message to Wall Street. The fact that the market is looking past the mixed report may also suggest that conditions had become “oversold”.

Meanwhile, the December-quarter earnings reports continue to stream in. Yesterday afternoon, LinkedIn (LNKD) issued weak guidance and that stock is trading lower today. We also heard from game maker Activision Blizzard (ATVI) and that issue is up on a good report. Meanwhile, Fairway Market (FWM), which had its IPO debut less than a year ago, is sinking on news of a management change. - Adam Rosner

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


Stocks to Watch From The Survey- With earnings season winding down, it is economic data that are getting most of the headlines this morning. The jobs report shows that the jobless rate did not improve by much in January, but payrolls were lower than expected.

From an earnings perspective, the Internet stocks are in the news today. Travel site Expedia (EXPE) released a favorable quarterly report that had its shares poised to move higher at the opening bell. Conversely, LinkedIn (LNKD), a social media site for the business world, left much to be desired on its release, and its shares look set to head lower this morning. Elsewhere, tech behemoth Apple (AAPL) disclosed that it has repurchased $14 billion worth of its own stock over the last two weeks, as its quotation headed lower over that span. This vote of confidence and use of the company’s cash war chest may well generate some enthusiasm among its shareholders.

On the Dow-30 front, no earnings are due in for the next week, however, two entities are rumored to be mulling over potentially sizable divestitures; Tech stalwart InternationalBusiness Machines (IBM Free IBM Stock Report) could be up for selling its chip manufacturing business, and industrial conglomerate United Technologies (UTX Free United Tech. Stock Report) is apparently ready to take bids on its Sikorsky arm, which makes helicopters.  - Erik M. Manning

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


Before The Bell - The bull is back--at least for one day--as those market optimists, celebrated better earnings numbers, a larger-than-expected drop in weekly jobless claims (and the implications for job growth, in general), and some welcome developments in the corporate board rooms, to post the best gain in seven weeks, or before the Federal Reserve began its monetary tapering initiatives in December. In addition, some are now suggesting that much, if not all of the early 2014 economic spottiness, was due almost entirely to the poor January weather.

All told, the U.S. stock market, taking its cue from Europe, which also advanced, began the session to the upside and never looked back, maintaining a triple-digit gain in the 30-stock Dow Jones Industrial Average for just about all of the session, finally closing up  188 points. The Standard and Poor's 500 Index added 22 points and the tech-heavy NASDAQ climbed 46 points. In each case, the gains were better than one percent, with the S&P 500 narrowly leading the way among the large-cap averages, with a 1.24% rise. The small- and mid-cap indexes also did well, with the S&P 400 Index, a key mid-cap benchmark, adding 1.39% to lead the way in the secondary market composites. The VIX, or the volatility gauge, which was down almost 14%, underscored the sudden greater tolerance for risk. The weaker tone on Wall Street had been lifting the VIX in a steady climb over the past fortnight. Still, even with yesterday's big win, the indexes remain lower for the week, reflecting Monday's 326-point drop in the Dow, as well as for the year as a whole.

As to specifics, as noted, weekly jobless claims fell by 20,000 in the latest seven-day stretch. That was a somewhat greater drop than expected, and some, perhaps, reasoned that this good news on the economy could presage a better showing on the monthly non-farm payroll front, where figures were released moments ago (see below). Also, of note, Coca-Cola (KO - Free Coca-Cola Stock Report) took a 10% stake in Green Mountain Coffee Roasters (GMCR), sending the latter issue up better than 25% on the day. Dow-30 component Coke shares rose just slightly. Also, on the Dow 30, entertainment behemoth Walt Disney (DIS - Free Disney Stock Report) reported better-than-forecast quarterly results and that stock jumped nearly $4.00, and to within a whisker of its all-time high. Armed with these items and perhaps somewhat oversold, the stock market roared ahead. Now, the question is whether the bulls can keep it up.  

As to influences today, we are seeing a strong pre-market gain in the shares of Apple (AAPL). That big NASDAQ component ended the session yesterday at $512.51 a share; the current pre-market indication is over $519, as CEO Tim Cook told the press that that company had bought $14 billion of its own stock in the two weeks since release of its latest quarterly results, which left investors asking for more. However, shares of LinkedIn (LNKD) fell sharply after posting a weak outlook.

But the big story is the jobs report, which showed that the nation had added just 113,000 new positions last month. That was well below the forecast increase of roughly 185,000 jobs, but was still modestly better than the upwardly revised 75,000 December tally. At the same time, the jobless rate ticked down from 6.7% in December to 6.6% last month. That was the lowest rate since October 2008. Obviously, the weather in January was a factor. The big question is just how much tolerance Wall Street is willing to give this latest miss. Judging by the notable early reversal in the equity futures, which now point to a mixed opening for the market, they are willing to forgive some of this jobs miss, but not all of it.   - Harvey S. Katz

At the time of this article's writing, the author had positions in DIS.