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After The Close - What was initially looking like another ho-hum trading day on Wall Street, with a mild negative undertone, actually turned into a big win for the bears. After a morning in which most of the major market indexes traded around the neutral line, the selling intensified as we hit the midpoint of the trading session and the losses widened considerably by the closing bell. The final damage were respective losses of 179, 61, and 23 points for the Dow Jones Industrial Average, the NASDAQ, and the broader S&P 500 Index. The index of 30 bellwether companies witnessed its biggest intra-day decline in more than five months today. Overall, declining issues led advancers by a sizable margin on both the Big Board and the NASDAQ.

The likely culprits behind today’s selloff were some continued concerns about last Friday’s dour report on the labor market, comments from a Federal Reserve official (see below), and some uneasiness ahead of a number of important quarterly earnings reports this week, including six from Dow-30 components. With regard to the latter, investors—already somewhat concerned about how the retailers fared during the important holiday shopping season—were a bit unnerved by weaker-than-expected earnings guidance from retailer Express (EXPR), apparel producer lululemon (LULU), and home beverage carbonation systems maker Sodastream International (SODA). Investors will get a better gauge on what to expect from the retailers this earnings season tomorrow morning when retail sales data for the month of December are released prior to the start of trading stateside. Speaking of the economy, a quiet day on the business beat also probably played a hand in the selloff, as no new significant reports were able to take the attention of traders off of last week’s weak employment data. 

From a sector perspective, it should come as no surprise that the consumer discretionary stocks were out of favor today. However, the consumer cyclical names had plenty of companionship in the red. Other notable laggards included the economically sensitive energy and industrial sectors. The more defensive-oriented stocks, including those in the utilities, telecom, and consumer staples sectors, were also not immune to the selling in the second half of the session. Even the technology and healthcare groups, which were earlier trading in positive territory succumbed to the broad-based late-day selling. Two technology stocks that bucked the overall downward market move today were Juniper Networks (JNPR) and Twitter (TWTR), the latter of which was helped by an upgrade from a major brokerage house. Looking ahead, we recommend that investors keep a close eye on the financial sector this week, as several of the large investment banks, as well as American Express (AXP - Free American Express Stock Report), are scheduled to report their latest quarterly results. 

Meantime, the S&P 500 Volatility Index (or VIX), which is also known as the “fear gauge”, rose more than 10% in the latest session, suggesting some apprehension among investors. In addition to the profit warnings noted above, investors’ anxiety was raised by comments from Atlanta Federal Reserve President,--who is a voting member on monetary policy—that he favored further monetary tapering.  A tightening of monetary policies is historically not viewed favorably by investors, and that certainly appeared to be the case today, especially with some investors coming into the week thinking that the weak employment data may force the central bank to only gradually taper its near-term bond buying. We should get some more clarity on what the Federal Reserve is thinking this Wednesday afternoon when the lead bank releases its latest Beige Book summation of U.S. economic conditions. -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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3:15 PM EST - Investors hoping that Friday's late comeback by the U.S. equity market would carry over into the new week have thus far been sorely disappointed as stocks, which had opened the session just nominally to the downside, and spent much of the morning having trouble making up their minds just where they were going, have turned down notably as the afternoon has progressed.

To wit, after some comments by the Atlanta Federal Reserve President that he favored further monetary tapering came across the news wire, and analyst comments at a key investment bank to the effect that the S&P 500 valuation was “lofty by almost any measure,” the market has turned down in a big way.

Thus, as we make our way into the final hour of trading we now see that the Dow Jones Industrial Average is off by 165 points; the S&P 500 Index is lower by 23 points; and the tech-heavy NASDAQ is in the red to the tune of 67 points. The small and mid-cap indexes, meantime, are faring even worse, with the S&P Mid-Cap 400 now off by a full percentage point and a half.

To date this year, any selloffs have been modest, with today's action the first retreat of some note. So, clearly the rest of the day will bear watching to see if the bulls can mount any defense or if the bears can really make a statement. Stay tuned for our closing comments to follow.  - 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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12:30 PM EST - The stock market is putting in a somewhat weaker performance today, as traders seem to be taking a breather. At past noon in New York, the Dow Jones Industrial Average is off 37 points; the broader S&P 500 Index is lower by three points; while the technology-heavy NASDAQ is essentially flat. Market breadth is mildly negative, as declining stocks are outnumbering advancers on both the NYSE and the NASADQ. Moreover, most of the market sectors are currently in negative territory, indicating some broad-based softness. Specifically, there are large losses in the energy sector, due to declines in the oil and gas producers. The price of crude oil is about 1% lower, to about $92 a barrel, and that too may be playing a role here. Also, some consumer names are slipping, thanks to losses in the apparel group. Nonetheless, the technology stocks are having a good session, helped by gains in the equipment makers. The healthcare issues are also making progress with gains in the pharmaceutical issues.

Technically, the S&P 500 Index has been moving in a sideways range this year, suggesting that traders lack commitment and may be in need of some direction. Further, the fact that stocks are trading at elevated price-to-earnings multiples, and have already staged large advances does not help matters. Meanwhile, volume remains light, which is also cause for some concern. Trading may heat up, as companies start releasing fourth-quarter reports, however.

Traders received no major economic news today, and that may explain some of the session’s directionless tone. Tomorrow will be a bit more interesting. The December retail sales are due out, and this will likely be an important release, as the holiday season is key for many retailers. Also, we get a look at monthly import and export prices, as well as business inventory levels. The Fed is back in the spotlight again on Wednesday, as traders get a look at a Beige Book release.

Meanwhile, in the corporate arena, we received a few news items today. In apparel, Express (EXPR) shares are losing ground, after that company lowered its guidance. Also, Lululemon (LULU) stock is off sharply, as the yoga apparel designer lowered its outlook. In drugs, Alnylam (ALNY) stock is soaring, as that company has signed a research collaboration agreement with Genzyme, the biotechnology division of Sanofi (SNY) and Alnylam has also purchased assets from Merck (MRK - Free Merck Stock Report). Merck stock is also trading nicely higher today. - 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 SurveyEarnings updates and M&A deals are dominating headlines this morning. On the M&A front, Japan-based spirits maker Suntory Holdings has agreed to purchase industry peer Beam Inc. (BEAM) for  $83.50 a share (or roughly $16 billion including the assumption of debt), a premium of about 25% to BEAM’s preannouncement closing price, causing the stock to soar in the premarket. Similarly, oilfield services provider Amec has agreed to acquire engineering and construction company Foster Wheeler (FWLT) for approximately $32 a share in cash and stock. FWLT is up slightly on the news. Finally, the stock of Alnylam Pharmaceuticals (ALNY) is spiking in pre-market trading, after a unit of drugmaker Sanofi (SNY) purchased a 12% stake in the biotech company for $700 million.

Elsewhere, companies, especially retailers, are updating guidance at a furious pace as fourth-quarter earnings season begins to heat up. One of the few bright spots was Wendy’s (WEN), as the restaurant operator issued solid preliminary fourth-quarter numbers, as well as a better-than-expected outlook, causing its shares to move nicely higher ahead of the bell. On the other hand, shares of Soda Stream (SODA), a maker of beverage carbonation systems for the home, athletic clothing retailer lululemon athletica (LULU), and apparel seller Express (EXPR) all delivered disappointing updates and outlooks. SODA and LULU are indicating sharply lower openings this morning, with EXPR shares headed for a more modest decline at the opening bell. – 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 - Wall Street spent the better part of the first full week of the new year eagerly awaiting the release, on Friday morning, of the monthly employment report for December from the U.S. Labor Department. Then, when it received this high-profile data, investors did not know what to make of the report, and reacted the way one would expect in such a setting. That is, equities rose, then fell, then rose again, fell once more, before finally closing this somewhat frenetic session in generally higher fashion, with the small- and mid-cap indexes and the NASDAQ easily outdistancing the Dow Jones Industrial Average. The Dow, weighed down by losses in a few of its components, ended the session eight points in the red.

This seesaw action evolved because the market had been expecting job growth of 190,000 and an unemployment rate of 7.0%. What they received, instead, was non-farm payroll growth of just 74,000, or barely a third of the forecast, and an accompanying drop in the jobless rate from November's 7.0% to just 6.7% in December. 

That apparent dichotomy can be explained by the fact that the low job creation level and the obvious difficulty in obtaining work by so many of the unemployed encouraged a number among the latter to exit the labor force. When such discouraged workers opt to abandon their job search, and thus leave the labor market, they are no longer classified as unemployed. Hence, with the workforce shrinking, as it did in December, the unemployment rate often falls.

Thus, there was little cheering that accompanied the lower jobless figures. Such dispiriting economic results, however, did not cause the bulls to flee en masse. In fact, stocks began the session higher, on some apparent relief among the bulls that poor job totals would cause the Federal Reserve to slow down its monetary tapering schedule. This contraction in bond buying, which commenced last month and had been expected to run its course in 2014, could now, if the latest employment trend is sustained, induce the lead bank to stretch out its monetary adjustment over a longer period--perhaps into 2015. We shall see.

Suffice it to say, this was a disappointing report, and even if it does give the Fed cause to slow its bond buying schedule, the flip side is that the weaker job data could both hamper the economy somewhat and, as a result, moderate any gains in corporate profit growth this year. Such crosscurrents kept both the buyers and sellers in check at the end of the latest week.   

Meanwhile, the reaction was still rather muted, we sense, because the poor weather encompassing much of the nation last month undoubtedly had some effect on corporate hiring and job searches. Moreover, most of the other economic reports issued over the past month have been supportive, including data on manufacturing, homebuilding, car sales, and consumer spending. In fact, we still think that GDP growth exceeded 2.5% in the recently ended fourth quarter, and could well average a similar pace for the first three months of this year. Thus, one report should be insufficient for the bulls to panic, and by the lukewarm action on Friday, it would seems as though they did not.   

As to the market in the latest session, we continued to see sector rotation, with the precious metals stocks, celebrating a four-week high in gold prices, pressing higher, and being joined by other natural resources issues, the basic materials stocks, the fertilizers, and some technology issues. However, the financials wilted again. Meantime, quarterly earnings seasons starts to kick into gear this week, after erstwhile Dow component Alcoa (AA) led the way with a disappointing late-Thursday earnings release. That stock fell more than 5% in the session.

Finally, as we look ahead to a new week, the earnings calendar, as noted, starts to fill up, and that will be the big news over the next couple of weeks before being supplanted by the next Fed meeting at the end of January. As to trading so far this week, the markets basically tracked a lower course in Asia overnight and are up a bit in Europe so far this morning. As to our markets, the early action in the equity futures points to a modestly weaker start for the trading week when the market opens in about an hour from now, with the futures suggesting that there is still some uneasiness about the latest employment report and some questions about the outlook for the Federal Reserve's tapering monetary efforts.   – Harvey S. Katz

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