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After The Close - The final day of trading this week was another volatile one for Wall Street, but the swings in the direction of trading were not as pronounced. However, a late surge of selling did push the U.S. equity indexes into the red by the closing bell. Even the Dow Jones Industrial Average, which was comfortably in positive territory for much of the day, was unable to hold the gains to the finish line, falling 20 points (or 0.2%) when all was said and done. The NASDAQ Composite and the S&P 500 Index, which seesawed back and forth around the breakeven mark for much of the second half, also fell sharply in the final minutes of trading, to finish 1.1% and 0.8% lower, respectively. As has been the case for several months now, a negative report on the euro zone’s financial crisis (see below) spooked investors and likely had a hand in the spate of late-day selling. Declining issues held a sizable lead on advancers on both the Big Board and the NASDAQ. Trading of small and mid-cap issues was also notably weaker, as evidenced by the declines of 2.6% and 1.6% in the small-cap Russell 2000 and the S&P Mid-Cap 400 Index, respectively.

From a sector perspective, all 12 of major groups finished in the red, with the biggest laggards being financial, consumer cyclical, basic materials, and energy stocks. Notable individual decliners included CF Industries (CF), Halliburton (HAL), and Nike (NKE).

The news regarding the sovereign-debt crisis in Europe was definitely not comforting to investors today. First, Germany’s chancellor Angela Merkel said Europe's banks should look first to raise money in the private sector before turning to governments to bolster their financial liquidity against potential losses from the sovereign-debt crisis. Our sense is that these remarks raised some concerns that the euro zone nations still may be a ways away from agreeing on the parameters of a bailout loan intended to help debt-saddled Greece avoid a crippling default. Then, later in the day, a major credit rating agency lowered its ratings for Italy’s and Spain’s bonds and issued a negative outlook for both countries. The value of the euro versus the dollar fell on these reports.

Meanwhile, the economic news on this side of the Atlantic was a bit better. An hour before trading commenced, the Labor Department issued its employment and unemployment data for the month of September. The employment situation improved somewhat in September, albeit the picture is still somewhat murky, as we approach the final months of this year. In all, the Labor Department, reported that the nation added 103,000 jobs last month. That was notably better than the consensus forecast of 60,000 jobs. However, that increase partially reflected the return to work of some 45,000 telecommunications workers who had been on strike in August. Backing that one-time boost out, job creation was about as expected. Too, the unemployment rate held steady (at 9.1%) despite a surge of new workers into the labor force. Next week the economic news will be a bit lighter, with notable reports on machine tool orders (Monday), the trade gap (Thursday), and retail sales (Friday). We will also get the minutes from the Federal Open Market Committee’s latest meeting on Tuesday.

It was a difficult day for commodities. This is not surprising given the strength of the dollar following the decent U.S. labor report and the aforementioned ratings downgrades of European debt. A stronger greenback makes commodities more expensive in overseas markets, which typically lowers demand for the products. Under pressure today were both gold and silver futures, along with most of the agricultural, live stock, and soft commodities. However, the price of oil, after trading in the red for most of the afternoon, rallied in the final stages of trading on New York Mercantile Exchange to finish the day in positive territory. - William G. Ferguson

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

 

 

12:00 PM ET - Wall Street breathed a sigh of relief as the employment picture showed signs of life in this morning’s Labor Department report. Stocks moved broadly higher at the opening bell as better-than-expected monthly payroll data greeted investors. The news that 103,000 jobs were added in September was an indication that the recession that many traders had feared is not imminent.

Another strong positive was the absence of concerns that troubles in Europe would wash up on these shores and create havoc in the manner that the collapse of Lehman Brothers did three years earlier. Europe’s difficulties remain deep, but hopes are rising that they will be contained.

Shortly after trading began, the Dow Jones Industrial Average had pushed ahead to a gain of about 100 points. The gains didn’t filter through to the NASDAQ, though, which has been largely in the red from the start, partly on a decline in the shares of Apple (AAPL), where there are concerns that the tech bellwether might lose its edge after the death of its founder, Steve Jobs. The tech sector was also hurt by biotechnology company Illumina’s (ILMN) disappointing third-quarter results and its decision to suspend future guidance.  

Meanwhile, the positive payroll number predictably caused bond prices to fall, with the yield (which moves in the opposite direction) on the 10-year Treasury note rising above the 2.00% threshold for the first time in a while. At the same time, oil prices rose moderately, as the increase in jobs means more people driving to work.

Stocks appeared to draw support, as well, from a Commerce Department report that showed wholesale sales in August rose much more than anticipated.

As the morning wore on, however, the Dow Jones Industrials pulled back from their best levels, after three days of good gains and ahead of the upcoming weekend. Just past midday on the East Coast, the Dow Jones Industrial Average is higher by 51 points, while the NASDAQ remains under pressure, and is lower by 14 points.

The Dow’s best performers on the day are two defensive issues, Merck (MRK - Free Merck Stock Report) and Pfizer (PFE - Free Pfizer Stock Report), followed by some of its more economically sensitive components, such as Home Depot (HD - Free Home Depot Stock Report), United Technologies (UTX - Free United Technologies Stock Report), and Boeing (BA - Free Boeing Stock Report). Laggards include banks Bank of America (BAC - Free Bank of America Stock Report) and JPMorgan Chase (JPM - Free JPMorgan Chase Stock Report), which were yesterday’s big winners.

So far, at least, today lacks the extreme volatility that has marked trading in recent months over fears of European contagion and the slowing economy. The upcoming earnings season that begins next week will provide a better read on how well Corporate America is navigating the challenges presented by this less-than-optimal set of circumstances. - Robert Mitkowski, Jr.

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

 

Before The Opening Bell - Wall Street has turned in the proverbial hat trick, which is a noted hockey term used to signify that one player has scored three goals. In this case, the three goals have been a trio of strongly higher sessions for the equity market in the past three days. That sort of multiple-session gains have been rare occurrences these days on Wall Street, especially during the recent third quarter and its initial aftermath. In fact, the three notably higher days have come after a further abrupt selloff in the equity market from the previous Friday through late this past Tuesday.
 
However, things changed in short order with less than an hour to go in the trading session on Tuesday, and stocks firmed further on Wednesday and again yesterday. In all, from the market's late-Tuesday trough, which had pushed the Dow Jones Industrial Average down by some 220 points, that 30-stock composite has surged by nearly 700 points. The equity market, so brutally oversold early in the week, is no longer as compelling a buy after the latest move--especially since some of the key issues that had caused a near bear market to evolve--and one did take hold, albeit just monetarily in the Standard and Poor's 500 Index--are still with us, especially along our shores.
 
What has shifted sentiment overnight has been a change in expectations in the euro zone. It seems that now, after weeks of speculation that Greece would default and that some of the more troubled banks over there would lose their viability, calmer and more reasoned thinking may be starting to prevail. We are not past this crisis, to be sure, and the back-and-forth negotiating and crisis-management still has further to go. But for now, at least, the feeling is that all is not lost, and that a way out of this financial mess may yet be at hand. We shall see. In any event, the bourses in Europe and their counterparts in Asia have been recovering as well. It seems these days that as one side of the Atlantic goes, so goes the other. Thus, multiple-percentage daily gains have now become common place globally. That has not been so thus far this morning, however, as Asia and Europe are both succumbing to some modest profit taking--at least thus far. Europe could now strengthen, though, taking their cue from a turn in the U.S. futures in the past few minutes (see below).
 
Meanwhile, so greatly has Europe been an influence over here, that our own economic struggles have, for much of this week, taken a back seat. Of course, the news along our shores has been a bit better in the past several days as we approach the final trading session of the week. Specifically, the Institute for Supply Management has turned in a pair of reports, on manufacturing activity and non-manufacturing activity, which have been a touch better than expected, while a report issued on Wednesday from ADP on private-sector payrolls, and one released yesterday by the government on initial jobless claims have likewise been incrementally better than consensus forecast.
 
All of this, of course, was just a prelude, to the monthly payroll data issued moments ago. Here, the U.S. Labor Department reported that non-farm payrolls, which had initially been estimated to have been unchanged in August and which consensus forecast had increasing by some 60,000 in September, actually rose by 103,000 last month. That, as noted, was almost twice the increase forecast. The jobless rate, meantime, held at 9.1%, as expected.
 
The good news on non-farm payrolls should, for now at least, make this the focal point of the stock market over here in the hours to come. Our sense, meanwhile, is that the rally of the past three days could have some legs to it, at least in the short run. Indeed, the equity futures, off modestly before the report's issuance, quickly sped forward, with the S&P futures, for example, racing ahead by 12 points and the NASDAQ futures shooting ahead by some 14 points. Thereafter, the focus will quickly shift to third-quarter earnings season, which will get under way in about a week. Profit reporting season lasts about a month. However, the major players, with few exceptions, report during the initial two weeks of the period. Thus by the end of this month, we should have a pretty good idea of the overall earnings trend in the just-ended period and the aggregate outlook for the fourth quarter and perhaps 2012. Our sense is that the data will make for just fair reading, with most companies matching expectations, but probably not exceeding them by much. This would be something of a shift from the previous few quarters, when Corporate America had routinely done better than expected. That more upbeat showing had a lot to do with the long bull market in place from early 2009.
 
As for our markets this morning, the solid payroll number and stable jobless rate should give stocks an early lift, as the market seeks to build upon the strength of the past few sessions. Four gains in a row, therefore, would seem in reach. Stay tuned. - Harvey S. Katz

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