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After the Close - The U.S. stock market put in a weak showing this morning, but managed to pare some of its losses as the session progressed. The initial decline was probably due to concerns about difficulties in Europe, and possibly a slower rate of economic expansion in Asia. Notably, Asia’s markets put in a lackluster session overnight, as traders looked for accommodations from various central banks in the region. Meanwhile, there was also probably some uncertainty about the upcoming release of China’s second-quarter GDP figure. In Europe, the markets did not perform well either. Ongoing worries about the financial situation in Spain likely played a role. 

Meanwhile, in the United States, there was some decent economic news out today, but it was largely shrugged off.  Specifically, initial jobless claims for the week ended July 7th, came in at 350,000, which was better than had been expected and an improvement over the 376,000 claims logged in the prior week. Readings under 350,000 generally indicate an improving employment situation. Tomorrow is a light day for economic news, with just the Producer Price Index for June, and the University of Michigan’s Consumer Sentiment Survey for July, due out.

Importantly, second-quarter earnings season is getting started, and there seems to be some concern about the quality of the reports.  We have already had a few weak issuances from technology companies. Today, shares of Infosys (INFY) were trading lower, after the business outsourcer reported weak profits and reduced its sales outlook. On the bright side, Germany’s tech company SAP (SAP) saw its stock move higher after the company put out a good report and raised guidance. In the food area, shares of SUPERVALU (SVU) plunged after the company missed analysts’ forecasts.

At the end of the session, the Dow Jones Industrial Average was off 31 points (-0.3%); the S&P 500 Index was down seven points (-0.5%); and the NASDAQ ended lower by 22 points (-0.8%). At the close of the day, declining issues were moderately outnumbering advancers on the NYSE.  While there was some strength in the capital goods and healthcare names, there was weakness in the financials and technology issues.

Technically, the S&P 500 Index has pulled back several sessions in a row. Today’s move brought the Index below its 50-day moving average at 1335, but it managed to close about even with that critical area. Hopefully, we will see some support start to materialize at this level. The market may be getting oversold. But, the VIX is at just 18, which is a very low reading, and suggests that for whatever the reason, traders are still somewhat bullish. 

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

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12:30 PM ET - The summer is hot, but stocks are not. With much of the nation sweltering under a July heat wave, the action on Wall Street has cooled notably. Just after noontime on the East Coast, the Dow Jones Industrial Average was off 30 points and the NASDAQ was down 29 points, or greater on a percentage basis than the Dow. Market breadth is clearly biased to the downside, with decliners outpacing advancers by a three to one margin on the New York Stock Exchange.

Stocks have already pulled back for five days in a row, with the absence of strong global economic growth the leading cause. For instance, investors are fretting that data due to come out of China tomorrow will show that nation’s GDP slowed further from the first quarter’s 8.1% pace. China, now seen as the world’s factory, is being hurt by a slowdown in exports to Europe, where major financial issues continue to create havoc.

The issues Europe faces may only be resolved in phases, too, rather than quickly. With the lengthy euro-zone integration process still in its early stages, and set against the backdrop of a likely recession, it is difficult for traders to maintain confidence. The fall in the euro, now at $1.22, down from $1.30 at the start of the year, underscores the concerns. The importance of the European Union as an economic force cannot be understated, either. Its member nations’ combined GDP of $17 trillion is greater than the United States’ $15 trillion.

Back home, the soft patch in the economy that the U.S. is going through has also undermined investors’ spirits, but recent data have likely not been so poor as to spur the Federal Reserve to make any big moves. The lack of major new initiatives on the Fed’s part, so far, and the likelihood of an uninspiring earnings season now at hand, are placing added pressure on stocks. 

All of the stock market’s ten sectors are lower, with basic materials, consumer cyclical, and technology stocks among the weakest. Notable names on the downside from those groups include Barrick Gold (ABX), Nike (NKE), Coach (COH), and Intel (INTC - Free Intel Stock Report). Stocks bucking the trend include drugmaker Merck (MRK - Free Merck Stock Report), which has been strong of late, and software maker SAP (SAP), which issued a better-than-expected profit report.

Overall, investors may require signs that Europe is making progress toward resolving its problems, that the U.S. economy is emerging from its soft patch, and/or some upside surprise to corporate profits, before becoming more bullish. In the absence of those developments, the market will increasingly look for the Fed to do something. - Robert Mitkowski

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

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Stocks to Watch from The Survey Earnings are in the headlines this morning, and shares of Supervalu (SVU) are plunging in pre-market trading, after the supermarket operator reported weaker-than-expected June-period results and suspended its quarterly cash dividend. The stock of Infosys Limited (INFY) is also down sharply in the premarket. The global information technology services company has reported decent June-quarter results, but issued an outlook that disappointed investors. Shares of Callaway Golf (ELY) have met a similar fate this morning, after the designer and manufacturer of premium golf clubs and balls released disappointing preliminary second-quarter results, issued a soft outlook, and announced plans to cut 12% of its workforce. On a rare positive note, investors appeared relatively pleased with the second-quarter financials of Fastenal’s (FAST), a retailer of industrial and construction supplies. The stock is trading modestly higher in the premarket. – 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 U.S. stock market fell back notably late in the afternoon yesterday for a second day in succession. And while the final losses were just modest, the decline was, nevertheless, the fifth in as many sessions for the leading equity averages. All told, the Dow Jones Industrial Average shed 49 points, bringing that composite of 30 mostly blue chip stocks down to just above 12,600, barely a week after that index had briefly flirted with 13,000. In addition, the NASDAQ lost 14 points, although winning and losing issues, boosted by some late bargain hunting, just about matched each other.

Pushing the market lower during the afternoon--with the Dow falling to a deficit of some 115 points at its nadir of the session--were some dour tidings from the Federal Reserve. Specifically, the lead bank's minutes from its June 30th FOMC meeting intoned that it was seeing a deceleration in business activity, but that the rate-setting FOMC was split on the merits of further monetary easing, or the adoption of a QE3 sort of remedial stimulus program.

Some investors had been looking for clues that the Fed was moving in the direction of being ready to take more curative steps, but there seems to be little appetite as yet to take the proverbial plunge in that regard. As to Europe, the bourses were mostly flat yesterday, although Spain did see some welcome bargain hunting just days after its bond yields had leaped above the 7% level. Yields have since backed off some, although that struggling nation is still in dire need of assistance from the European Union.

Meanwhile, our sense is that the Federal Reserve is moving somewhat closer to taking simulative action, such as further bond buying, but that even with the listless rate of employment growth now being seen, it is not yet ready to fully commit to such a program. The central bank has been hoping that fiscal measures would be adopted to take some of the pressure off of its shoulders. However, in the current fractious setting in politically charged Washington, such moves seem unlikely during this election year. The need is there to do something, though, as mandatory tax hikes and spending cuts are set to kick in by year's end unless some action is taken by a badly divided Congress.

Meantime, a new day is dawning, and once again there is a paucity of economic news due out today. Yesterday, however, we did see the Commerce Department break the summer's monotony with the release of data on the nation's trade deficit. That gap narrowed some in May, but the deficit remains historically large, at more than $48 billion for the latest month for which such figures are available. Today, the lone piece of pivotal data issued was the weekly jobless claims figure, which showed that initial layoffs fell much more sharply than expected in the latest seven-day stretch.

As for the markets, they are skidding across Europe on some disappointment that the Federal Reserve did not indicate that it was primed for a new bond buying program to help stimulate the U.S. economy, amidst further signs that the euro zone's collective economy is in serious trouble. As for our futures, the good news on the jobless claims front has not dulled the apparent urge among the bears to sell, as our futures are sharply lower at this time, suggesting that stocks will open clearly to the downside when trading commences in about a half 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.