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After The Close - The final two days of the holiday-abbreviated trading week on Wall Street produced conditions that could rival the bitterly cold weather that has engulfed much of the Northeast. Indeed, the final two sessions saw trading cool considerably, with the bears emboldened by softer-than-expected manufacturing data from China, growing concerns about emerging markets, and some less-than-compelling earnings reports stateside. The sharp selloff the last few days on the heels of two uneven sessions to start the week resulted in the worst five-day stretch for stocks in eight months.

Today’s market data made for a very disappointing reading. The Dow Jones Industrial Average, the NASDAQ, and the S&P 500 Index all finished markedly lower, adding to yesterday’s outsized losses. In particular, the index of 30 bellwether companies dropped almost 500 points over the two-day span. Overall, declining issues led advancers by a whopping margin on both the New York Stock Exchange and the NASDAQ, to the tune of more than six to one on both exchanges. Other than the utilities sector, there was no place for skittish investors to hide in the equity market—and even the defensive-oriented high-yielding group succumbed to selling by the closing bell. Among the top-10 sectors, the biggest laggards were the groups that are most closely tied to the performance of the global economy. Thus, it was especially not a good day for those long industrial, energy and basic materials stocks. Our sense is that yesterday’s lackluster manufacturing data from China was the big drag on the performance of these sectors. There is growing concern that a slowdown in the world’s second-largest economy would hurt the performances of the U.S. and euro-zone economies. Also, financial stocks, particularly those of the big banks, were hurt by comments from Attorney General Eric Holder that “no bank is too big to indict.”

Meantime, now more than week into the fourth-quarter earnings season, it appears that on a whole, the recent releases, which have been marked by some big companies missing on the top line, are not strong enough to make a case for investors to keep pumping additional funds into a stock market, where valuations had become materially stretched. Nevertheless, the reporting season has brought a few pleasant surprises, including the latest results from Microsoft (MSFT - Free Microsoft Stock Report). Shares of the technology giant rose today as the company said that brisk sales of the latest version of its Xbox gaming console drove strong results in the holiday shopping season. Likewise, the stock of fellow Dow-30 component Procter & Gamble (PG - Free Procter & Gamble Stock Report) fared well after the consumer products giant posted lower net income, but surpassed expectations. Another standout performer was Starbucks (SBUX), which moved higher after the company said global sales at stores open at least 13 months were up 5% in the fourth quarter of 2013, and it increased its 2014 earnings forecast. Still…

Given the aforementioned international economic concerns and the uninspiring earnings results on the homeland, the S&P 500 Volatility Index (or VIX), which is often referred as the “fear gauge,” jumped considerably the last few days, to the tune of around 30% during today’s session. Unnerved investors, displaying a “flight-to-safety” strategy the last few sessions have turned to gold and fixed-income securities. The price of the precious metal was up sharply again today and bonds, which were out of favor the last several months, were gobbled up by worried investors. In fact, the yield on the benchmark 10-year Treasury note, which moves in the opposite direction to the price, fell to its low level since late November, when investors were a bit worried by what the holiday shopping season might bring for the retailers.

Looking ahead to next week, the bulls are hoping to get some needed relief in the form of another batch of encouraging economic data. All in all, save for this month’s report on the labor market, such business data have been pretty constructive. Next week will bring reports on new home sales (Monday), consumer confidence and durable goods orders (Tuesday), the first reading on fourth-quarter 2013 GDP (Thursday), and personal income and spending and the final reading for the month on consumer sentiment (Friday). Plus all eyes are expected to be on the Federal Reserve, which will issue a statement on Wednesday following the conclusion of its two-day monetary policy meeting. A continued tapering of its monthly bond-buying program seems to be the consensus among market pundits.

The aforementioned economic data, along with another hefty week of earnings news, including the latest quarterly results from nine Dow-30 companies, could make for another volatile trading week on Wall Street. If anything, we will likely see some continued sector rotation, as investors begin to concentrate more on fundamentals with the easy money tapering likely to continue. Those investors that are better able to identify the relatively undervalued asset classes going forward may have a leg up in what is shaping up to be a challenging market ahead. The U.S. equity market is headed toward its first down month of trading since last August.   - 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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12:15 PM EST - The U.S. stock market is falling again today, extending yesterday’s losses. At just past noon in New York, the Dow Jones Industrial Average is off 176 points; the broader S&P 500 Index is down 23 points; and the technology-heavy NASDAQ is lower by 62 points. Market breadth shows broad based selling, with declining stocks outnumbering advancers by over five to one on the NYSE. Weakness can be found in all of the market sectors, with sharp losses in the basic material issues. The healthcare names are also quite weak today. Once again, the utilities, while trading lower, are showing some relative strength. Notably, these issues tend to be defensive, and often hold up well in weaker markets. In other defensive areas, investors are buying gold, as the precious metal is up to $1,267 an ounce. Silver is also seeing some buyers. A move into these commodities may suggest that investors have turned cautious.

As was the case yesterday, the selloff in the U.S. markets seems to be related to weakness overseas. And, on cue, the markets in Asia and Europe headed lower overnight and earlier this morning. In addition to general concerns about the rate of expansion in China’s massive economy, investors now also seem concerned about the stability of the currency and bond markets in some emerging countries. Investors, once willing to invest in these regions when the interest rates offered in the U.S. were quite low, now seem less willing to take on this higher level of risk.

Technically, the U.S. market had been struggling for much of January, and now it seems a selloff is in the making. It remains to be seen, if the bulls will move in to support stocks, by the end of the day, or if the selling will accelerate. Nonetheless, there seems to be some sense of urgency, as the VIX is up 20%, to almost 17 today.

There were no major economic reports released today, but investors did get a few earnings releases to mull over. The news, while mostly constructive, has been largely overlooked. Specifically, Microsoft (MSFT - Free Microsoft Stock Report) stock is up, after the technology stalwart put out a strong release. Juniper (JNPR) shares, too, are advancing, after the networker put out decent results. In the medical area, Bristol-Myers (BMY) shares had been up on a positive release, but they have since fallen back with the broader market. - 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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10:45 AM EST - After putting to work the so-called "buy on the dip" philosophy for many months, thereby avoiding the dreaded market correction, the bulls have suddenly started to shy away from this strategy. Thus, after the stock market had pressed sharply lower yesterday, fumbling by 176 points in the Dow Jones Industrial Average, the selling has resumed with some vigor today.

Such selling, which was ushered in yesterday, we believe, by a checkered fourth-quarter earnings pattern and by concerns about suddenly flagging growth in China, the world's second largest economy, then spread into Asia overnight and across Europe this morning.

Now, add onto these lingering depressants, concerns about emerging market economies and their financial structures, the selling has resumed on our shores. 

On point, as we head toward the 90-minute mark of the trading day here, we find that the Dow is off again sharply, declining by 170 points. And, unfortunately for the bulls, that blue-chip composite is being joined even more furiously on the downside by the NASDAQ (off 53 points), the S&P 500 Index (down 21 points) and the S&P Mid-Cap 400 Index (lower by 22 points, or 1.6%). It is not pretty out there thus far.   - 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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Stocks to Watch from The SurveyInvestors continue to have their hands full with December-quarter earnings reports, many from high-profile companies. On point, after yesterday’s steep selloff, today’s batch of releases is mixed (although the futures are pointing sharply lower). On the bright side, shares of technology icon Microsoft (MSFTFree Microsoft Stock Report), consumer products companies Procter & Gamble (PGFree Procter & Gamble Stock Report) and Kimberly-Clark (KMB), coffee shop operator Starbucks (SBUX), tool maker Stanley Black & Decker (SWK), chipmaker Altera (ALTR), and telecommunications equipment company Juniper Networks (JNPR) are all moving higher ahead of the bell on earnings reports. It was not all good news, however, and shares of office equipment manufacturer Xerox (XRX), industrial conglomerate Honeywell (HON), slot machine developer International Game Technology (IGT), and medical supplies company Intuitive Surgical (ISRG) all indicating lower opening this morning, with IGT showing considerable weakness. – 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 had trouble making up its mind to start the week, judging by the mixed-to-lower performance on Tuesday and the slightly better-than-neutral showing on Wednesday, finally did make up its mind yesterday, and for the bulls, at least, it was anything but a walk in the park.

To wit, after back-to-back indecisive outcomes to open the holiday-shortened four-day stretch, the bulls hit a brick wall yesterday, with equities starting the day noticeably lower and then falling from there. At its worst, in early afternoon, the 30-stock Dow Jones Industrial Average, for example, was off by just over 230 points. Now, given that we had closed the previous trading day at 16,373, the latest setback, even at the day's nadir, was not all that unnerving. However, it is also true that with valuations as stretched as they are right now, yesterday's setback will need to be watched.

Meanwhile, what set the bears off yesterday was a weaker economic report out of China--the world's second largest economy. On point, that nation's manufacturing index showed a mild contraction in January. Now, such a showing should not be that big a deal, as it was not as though things had really headed south in that country's industrial base. It is just that the downtick was a surprise, And, Wall Street abhors surprises, especially when the market is inflated, as it is currently. Of course, it wasn't only the Dow that sold off yesterday. We also saw a meaningful decline in the tech-heavy NASDAQ, which was only buffered to a degree by a strong gain in the shares of Netflix (NFLX). That iconic entertainment-related stock soared by better than 16% on upbeat quarterly metrics. The Netflix gain was an anomaly, however, as most stocks in the news faltered--and some rather badly in the latest session.

The news from overseas, while hardly welcoming, was offset to a degree by another stable report on weekly and continuing jobless claims and by a slight gain in sales of existing homes in December. Both issuances suggest that these two critical sectors are likely to show additional strength in 2014, with the economy at large expanding by some 3%. The concern among traders is that should China falter, and this one report is hardly confirmation of that, our economy may be affected for the worse. For now, though, the situation in China needs to be watched, but not overreacted to, in our opinion.

Otherwise, it was an earnings-driven market, but unlike recent quarters, the metrics have not been sufficiently compelling to bring in the buyers, at least with any frequency. In fact, after the market had performed rather well in December, perhaps in anticipation of a good earnings reporting season, the actual reports themselves have not been strong enough to push the overall equity market higher. In fact, stocks have labored thus far in January. Of course, with prices now extended, it would likely take a strong batch of profit reports to send equities materially higher. And so far, we are not seeing that strength, in the main.

As to the market breakdown, after the initial selling burst, stocks held in decidedly lower territory throughout the day, with the Dow, under some pressure from the financials, finally closing down by 176 points. The NASDAQ, notwithstanding the large Netflix gain, still closed off by 24 points; the Standard and Poor's 500 Index was lower by 16 points; and the Russell 2000 Composite eased by nine points. Bucking the trend was gold, with the precious metal rising to a multi-week high. That continuing recovery, albeit still modest, helped the gold equities, with Newmont Mining (NEM) managing to reverse some of its recent losses, with a modest gain of 3%. Oil rose, too, although energy stocks still faltered. Meantime, there were some isolated winners on the Dow, with International Business Machines (IBM - Free IBM Stock Report), a loser the previous session on weak revenues, and the telecoms pointing higher. Overall, though, it was a poor showing by the bulls, although the market did manage a slight comeback near the close. 

Now, as we look ahead to the final trading day of the week, the news is not good for the bulls. Specifically, stocks were materially lower in Asia overnight, while they are now faltering badly in Europe thus far this morning, with Spain leading the way lower to the tune of some 3%. And on our shores, skittishness about earnings, China, and the Federal Reserve--meets next week--are causing our futures to head lower. On that score, the S&P 500 futures are off by 11 points, while the NASDAQ futures are now lower by 24 points, as we ready ourselves for the start of the new trading day in about an hour from now. - Harvey S. Katz   

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