After the Close The major U.S. equity indexes once again traded in a narrow band around the neutral line for most of the session in another light volume day. It appears that investors are not about to make a significant bet in either direction prior to the Federal Reserve’s meeting in Jackson Hole, Wyoming later this week. Still, the Dow Jones Industrial Average, the NASDAQ, and the S&P 500 Index were able to muster nominal gains by the closing bell, helped by some mildly encouraging news on the U.S. economy (more below). Advancing issues outpaced decliners on both the New York Stock Exchange and the NASDAQ.

As noted, the economy took center stage today and, for the most part, the data were decent. At 8:30 A.M. (EDT), the Department of Commerce revised its estimate for second-quarter GDP growth from 1.5% to a mildly more reassuring rate of 1.7%, which was in line with the consensus expectation. Then, we learned that pending home sales for July increased by 2.4%, which was better than expected and a stark contrast to the 1.4% decrease that was experienced in the prior month. And at 2:00 P.M. (EDT), the Federal Reserve released its August Beige Book summation of aggregate economic conditions, which suggested "economic activity continued to expand gradually in July and early August." The lead bank also noted an improvement in credit conditions and the housing market. Sales and construction continue to rise gradually, while employment is holding steady or showing marginal improvement. In our opinion, these reports make it no better than 50-50 that the central bank will enact another round of quantitative easing in the month ahead. We recommend that investors pay close attention to what Chairman Bernanke has to say later this week because his remarks could spark market activity. Our sense is another round of quantitative easing would be positively viewed by most market participants.

Meanwhile, the economic news from overseas continues to put a damper on the mild progress being made on these shores. Several of the euro-zone economies are in recession and the sovereign-debt worries appear to be intensifying, as additional locales in financially struggling Spain requested more assistance in handling their credit crunches. If Spain is heading down the same road as Greece, it would probably have far-more serious consequences given the size differential between the two euro-zone economies. Trading on the Continent was mixed earlier today, but the overall tone was negative. Germany’s DAX finished nominally higher, while Britain’s FTSE-100 and France’s CAC-40 were each down about 0.6%. The euro weakened slightly versus the dollar.

Turning back to the U.S. market, it was a mixed day with regards to the 10 major sectors. On the positive side, consumer cyclical stocks stood out. Our sense is that the aforementioned semi-encouraging news on the domestic economy gave stocks in that sector a bit of a boost. Conversely, the energy and basic materials groups were notable laggards. A retreat in crude oil prices on the New York Mercantile Exchange—prompted by data showing an inventory build of 3.778 million, which was bearish considering the consensus called for a draw of 1.8 million—weighed on energy issues, with Exxon Mobil (XOM Free Exxon Stock Report) and Chevron (CVX - Free Chevron Stock Report) among the worst performers in the Dow 30 today. Within the basic materials space, steel and precious metals stocks struggled again during the latest session, with U.S. Steel (X) shares off almost 3%.

Looking ahead to tomorrow, barring any major news from the euro zone, particularly with regards to the ongoing sovereign-debt crisis, we anticipate another light volume trading day ahead of the Federal Reserve’s symposium in Wyoming and the fast-approaching holiday weekend. Such light volume could make for a volatile conclusion to the trading week if the bulls don’t hear what they want to hear from the lead bank on Friday.   - 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 - The U.S. stock market has been waffling this morning, but is now edging into positive territory. At just past noon in New York, the Dow Jones Industrial Average is up about two points; the broader S&P 500 Index is ahead one point; but the technology-laden NASDAQ is slightly lower. Market breadth still indicates a mixed tone, as advancing issues are just slightly outnumbering decliners on the NYSE. The market sectors are also mixed. There are losses in the basic materials, energy, and capital goods sectors, offset by some gains in the healthcare, consumer cyclical, and services area.

Technically, the S&P 500 has not been able to make a sustained move much above 1,420, and has found support around the 1,400 area. Trading volumes remain light, and that is still of some concern. It is not clear what catalysts will push the market in one direction or another, from here. However, as we move through September, traders may receive some third-quarter earnings announcements or guidance revisions.

Meanwhile, the economic news did not hold too many surprises today. The Department of Commerce’s revised estimate for second-quarter GDP, showed that key figure rising 1.7%, which was in line with what many had expected, but above the initial 1.5% reading. Elsewhere, the news continues to point to a housing market recovery.  Specifically, pending home sales rose 2.4% in the month of July. This figure was better than analysts had been anticipating, and also stands in sharp contrast to the slight dip in sales logged in June. The Home Builders Index (XHB) is heading higher in response to the news. Later today, we will get a look at the Fed’s Beige Book summation for the month of August. Tomorrow will be a somewhat busy day for reports, too. The employment situation will be in the spotlight, with the release of the weekly initial and continuing jobless claims numbers. We will also receive a report on personal spending and income for July. Meanwhile, traders are still awaiting remarks from the Fed Chairman due out on Friday at the Jackson Hole WY conference.

There were a few corporate news items that bear mentioning. Joy Global (JOY) stock is slipping, after the mining equipment supplier posted weak results and tempered its outlook. Shares of Frontline (FRO) are also down on a disappointing report, and news that the second-quarter dividend payment will not be made. On a brighter note, retail apparel company Jos. A Bank (JOSB) is seeing its stock rise on strong quarterly figures. Also, Zale (ZLC) stock is up on an encouraging report.   - 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 There is some earnings news out today. On the bright side, shares of jeweler Zale Corp. (ZLC), shoe company Genesco (GCO), supermarket The Fresh Market (TFM) and, most notable, men’s apparel retailer Joseph A. Bank (JOSB), are trading higher on earnings news. However, coal mining equipment company Joy Global (JOY) and telecommunications services provider Dycom (DY) appeared to disappoint investors with their quarterly reports, and those stocks are indicating lower openings this morning.

In other news, shares of WellPoint, Inc. (WLP) are trading moderately higher in the premarket, after Angela Braly, the health insurer’s CEO, capitulated to investor pressure and resigned. – 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 unusually tight trading range that we have seen for much of the summer continued in the latest session, with the Dow Jones Industrial Average easing by 22 points, the NASDAQ adding four points, the Standard and Poor's 500 Index edging lower by a mere point, and the small-cap benchmark Russell 2000 composite rising by four points. Overall, and notwithstanding the modest setback in the Dow, the day had a slightly positive tilt to it, as investors awaited both this afternoon's Beige Book issuance and Friday's speech by Federal Reserve Chairman Ben S. Bernanke at Jackson Hole, Wyoming.

By Friday, we should have a better idea as to whether or not the central bank will opt for more quantitative easing in the possible form of a QE3, as a way to hopefully invigorate a still-slumbering U.S. economic recovery.

Overall, the economic engine has been picking up a little speed, and that may lessen the odds of a QE3. But yesterday, we did see some cold water thrown on things when the U.S. Conference Board issued data showing a fairly sizable retracement in the recent uptrend in consumer confidence. That survey, which came in at a mildly encouraging 65.9 in July, fell back to just over 60 in August. Expectations had been for a flattish reading of 66.0 for the now-ending month. On the other hand, data on housing prices, a formidable obstacle to a significant and sustainable rebound in housing demand, rose last month, gaining ground, according to Case Schiller, in 18 of 20 cities. Reviving real estate values are critical to unleashing the pent-up demand now in place across the country after some six years of steadily weakening housing prices and activity.

Meanwhile, the already troubled situation in Europe continues to worsen, and that steady erosion of strength is clearly having an impact in curbing optimism in the markets over here. Specifically, Catalonia became the third region in Spain to ask that nation's central government for a bailout. There are reasonable fears that Spain may go the route of Greece in needing such help.

Closer to home, the markets will be watching for the aforementioned Beige Book issuance this afternoon for some hint whether or not that summary of economic activity across the country will shed light on Fed intentions to monetary policy. Investors probably should watch the comments about job growth and consumer spending from the dozen Fed Districts for some clue as to what the central bank may be planning. The latest data on job growth were encouraging as the early August government report indicated the nation added 163,000 payrolls over the prior month. We also saw data issued in mid-August noting that retail sales had risen by 0.8% in the prior month.

Of course, the headline event of the week is Mr. Bernanke's speech before the Jackson Hole symposium. We think there is no better than an even chance that he will push for a QE3 at that time, however, which would logically disappoint the markets. In the meantime, the government has just released revised second-quarter gross domestic product figures showing that growth perked up to 1.7% in the period from an initially estimated gain of 1.5%. However, the GDP result was below the opening-quarter advance of 2.0%. The equity futures off nominally before the 8:30 AM (EDT) issuance, edged modestly into the plus column on the report's release possibly presaging a mildly positive opening when traders get down to business in less than an hour from now. – Harvey S. Katz

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