Loading...
 

After The Close - The major stock indexes today ended up not far from where they started, but there were a number of ups and downs along the way. Stocks started out Monday with lingering weakness following disappointing earnings reports from a couple of major companies late last week. The bulls were not about to be cowed into submission, though, after being emboldened by a proposed merger between a pair of discount retail chains. It took a while for the boost in sentiment to kick in, but stocks by early afternoon began to head higher.

A degree of wariness resurfaced among investors, though, as fighting flared anew in the Middle East and Ukraine. Word that further sanctions might be implemented later this week by the United States on Russia for its actions in Ukraine didn’t help matters, either.

Make no mistake, international sanctions by the world’s greatest economic superpower on Russia have the potential to take a toll. Russia, for all of its ballyhooed past in the Cold War as the world’s other superpower, never came close to matching the United States’ business strength. U.S.-based companies are urged to abide by both the letter and the spirit when sanctions are applied, making their effect on the intended target that much more effective. But while sanctions may be a political necessity, they are bad for international trade.  

Meantime, caution ahead of this week’s Federal Reserve policy meeting, and prior to the release of highly watched economic data, including Wednesday’s initial reading on the nation’s first-quarter GDP and Friday’s government nonfarm payrolls report, also seemed to reign. 

At the end of the day, the Dow Jones Industrial Average was up 22 points, but the S&P 500 was flattish and the NASDAQ lost five points. Market breadth was bearish, with the number of stocks declining easily outpacing those advancing on both the New York Stock Exchange and the NASDAQ.

Among the market’s various sectors, the session’s risk-avoidance was highlighted by the defensive utilities’ sector’s outperformance. Elsewhere, housing stocks lagged after the release of some weak data.

Tomorrow brings a bigger wave of profit reports from Corporate America than today, including earnings from a couple of Dow-30 components. Tuesday also marks the beginning of the Fed’s two-day policy meeting, in which the central bank is expected to stay on course with its major policy initiatives. - Robert Mitkowski

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

-

12:30 PM EDT - The U.S. stock market got off to a weak start this morning, but is now well off its session lows. At just past noon in New York, the Dow Jones Industrial Average is down 33 points; the broader S&P 500 Index is off five points; and the NASDAQ is lower by 20 points. Market breadth is still negative, with declining stocks ahead of advancers by a decent margin on the NYSE. Too, most of the equity sectors are stuck in negative territory. Specifically, there are losses in the industrial names. Further, some of the consumer stocks are losing ground. In contrast, the utilities are advancing quite a bit today. Investors, possibly feel a bit more cautious, and may now be taking another look at these defensive high-yielding issues.
               
Notably, stocks have pulled back over the past couple of sessions. The selling has been a bit more pronounced on the Dow, which recently fell to its 50-day moving average. So far, the market retreat has been quite orderly. However, it remains to be seen if a deeper pullback will unfold from here, or if stocks will stage another advance. The second-quarter earnings season is still likely the main area of concentration for traders. Many of the larger companies have already reported their results. Now, over the next few weeks the smaller companies will weigh in.

Meanwhile, the economic news has been somewhat light today. Specifically, pending home sales declined 1.1% in the month of June. Many analysts had been looking for a slightly stronger showing. Tomorrow, the Conference Board’s Consumer Confidence Index for July is due out.

Finally, the corporate reports continue to stream in. Today, we heard from Tyson Foods (TSN). That stock is moving higher, even though the company put out mixed results. Traders received some merger and acquisition news today, too. Notably, Family Dollar (FDO) has agreed to be purchased by Dollar Tree (DLTR). Traders generally see consolidation as a plus, as it often leads to higher profits. - 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 now in full swing, we will also be getting a plethora of economic reports this week; the Fed will be meeting; the jobs report is due out; and second-quarter GDP figures will be announced.

On the earnings front, it is a particularly slow start to the week with food processor Tyson Foods (TSN) being the most prominent name reporting today. Another food-processing entity that is often in the headlines, Herbalife (HLF) is also up on the earnings docket.

On the M&A side of the coin, Family Dollar Stores (FDO) shares are up in premarket trading due to an already accepted buyout offer coming from fellow discount retailer Dollar Tree (DLTR).The price tag of $74.50 a share represents a 23% premium for FDO shareholders. Both boards have already approved the pact, and a closing date is expected in early 2015.

Finally, news continues to roll with regard to tax inversion. The latest company to try its hand at the move is drug firm Hospira Inc. (HSP), which is in talks to purchase the medical-nutrition arm of Danone S.A. The deal could be as large as $5 billion with the most noticeable long-term benefit being HSP’s ability to shift its tax domicile to France.  - 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 - After a series of trading days in which geopolitical events more than fundamentals held sway on Wall Street, last Friday brought things back to some sense of normality. That is for one day, at least, traders took their cue from earnings, rather than the latest news out of Ukraine and the Middle East. Of course, while the de-emphasis on these hot spots was welcome as it suggested that no new round of deterioration was present, the shift over to earnings was not to the liking of the bulls.

That is because stocks opened the session lower and proceeded to stage a wire-to-wire loss for the bulls, as the leading averages continued to press downward throughout the day. What got the ball rolling, apparently, was a disappointing quarterly issuance from Amazon.com (AMZN) and disquieting guidance going forward. The online retailer posted a larger loss than anticipated and promptly saw its stock tumble some 10% on the day. And Amazon was not alone, as investors were seemed to be looking for more out of credit card giant and Dow-30 component Visa (V - Free Visa Stock Report). That stock fell by some 4%, even though its results were decent on the whole. However, the company, too, provided disappointing guidance for the full year.

Under pressure from these two market stalwarts and from other volatile issues that saw the underlying corporations post mixed results, the market ignored a decent economic report on durable goods orders for June, in which that volatile series secured its fourth increase in the past five months. In all, the 0.7% gain for the latest month was incrementally better than forecast, although hardly eye-catching. The reasonable data also helped to assuage the disappointment seen on the housing front earlier in the week, in which a survey confirmed that sales of new homes had tumbled in June. Given the somewhat weaker flow of earnings, though, the bears retained the reins. And by the close, the Dow Jones Industrial Average, under pressure from Visa, was down 123 points; Standard and Poor's 500 Index was lower by 10 points; and the NASDAQ, weighed down by the aforementioned Amazon.com, was in the red to the tune of 23 points. The small-cap sector, as represented by the Russell 2000, also took a hit, ending off by more than 11 points. It was not a welcoming days for the bulls, to say the least.  

Meanwhile, the heavy flow of earnings will continue this week with a number of large companies reporting their quarterly figures along with an increasing share of smaller corporations, as the focus will gradually shift to this latter category. Also of note, there will be a whole host of economic releases in the days to come. On this count, we will get data on pending home sales today. That metric will take on added significance in light of the generally poor quality of the recent housing issuances. Then, tomorrow, the Conference Board will put out its monthly survey on consumer confidence. A further gain here is the expectation. That report will be followed on Wednesday by the first look at second-quarter GDP. A strong gain is forecast here after the initial period's sharp weather-impacted 2.9% contraction. 

Those reports will then be followed by Thursday's report on weekly jobless claims, Friday's releases on U.S. manufacturing activity, and the Labor Department's monthly issuance on job growth and the unemployment rate. This economic survey has the potential to be a market mover. In between, the Federal Reserve will hold its latest FOMC meeting. That event is scheduled to conclude Wednesday afternoon. A further monetary tapering is the forecast, but no change in the near zero level of short-term interest rates. We think such borrowing costs will remain at their present historically low levels until well into 2015.      

Now, as we begin the last four days of July, we find that markets in Asia were mixed overnight, while the main bourses in Europe are pressing a bit higher, save for Germany's DAX so far this morning. And on our shores, the futures, which had been pressing lower earlier this morning, have now moved into more of a neutral posture, boosted, no doubt by a pickup in merger and acquisition news this morning in the retailing space. That generally bullish news could help ease some of the angst as violence and unsettling developments appear to again be on the rise in the fractious Middle East.   - Harvey S. Katz

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