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After The Close - The U.S. stock market put in a somewhat volatile session today, but managed to close with decent gains. At the end of the day, the Dow Jones Industrial Average was up 91 points (0.8%); the broader S&P 500 Index was higher by seven points (0.5%); and the technology heavy NASDAQ tacked on 18 points (0.6%). Market breadth was favorable, as advancing issues outnumbered decliners by just over 2 to 1 on the NYSE. Almost all of the market’s sectors headed higher, with leadership in the basic materials, capital goods, and energy names. Notably, strength in the energy stocks was likely related to a strong rise in crude oil prices today. Crude oil is now at almost $98 a barrel, closing in on the “psychologically” important $100 mark. In contrast, there was some weakness in the utility issues, which ended in negative territory. This may suggest that traders are rotating into the more volatile stocks, as they attempt to capture some added upside.

Technically, the S&P 500 Index has found its way back above the key 1,400 level, after closing just under this figure yesterday. Trading volumes remain weak, though, and it will be interesting to see if the volumes pick up after the holiday, as this represents the unofficial end to the summer season.

The main event today was a widely watched speech given by the Fed Chairman Ben S. Bernanke. The speech at Jackson Hole, WY noted that the U.S. economy was still sluggish, leaving the door open for additional stimulus measures, such as asset purchases, known as quantitative easing, if needed. However, nothing concrete was announced, leaving traders looking ahead to the next FOMC meeting, which will be getting under way on September 12th.

Meanwhile, traders did receive a few economic reports today. Specifically, manufacturing in the Chicago region was a bit weak. The Chicago PMI for the month of August came in at 53.0, which was just below the figure that analysts had been expecting, and also a bit lower than July’s reading. On a brighter note, the University of Michigan’s Consumer Sentiment Index rose to 74.3 for August, just better than anticipated. Also, there was a favorable factory orders report. Orders rose 2.8% in the month of July, which was better than anticipated, and stands in contrast to the decline posted in June.

Next week will be busy. On Tuesday, we get a look at the ISM Manufacturing Index for August, as well as reports on construction spending, and auto sales.  Notably, the employment report for August will come out on Friday, and traders will definitely be watching that issuance.   - 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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12:30 PM ET - It has been a bit of a rollercoaster ride on Wall Street this morning for those long equities. After a bit of profit taking yesterday, the buyers returned at the outset of trading today. The early momentum that saw the Dow Jones Industrial Average up more than 100 points briefly lost steam on Federal Reserve Chairman Ben Bernanke’s comments in Jackson Hole, Wyoming, but has since returned with greater force, with each of the indexes near new intra-day highs. As we approach the midday hour on the East Coast, the Dow 30, the NASDAQ Composite, and the broader S&P 500 Index are up sharply, with advancing issues comfortably ahead of decliners on both the Big Board and the NASDAQ. It also is worth noting that all 30 stocks in the Dow are currently in positive territory, with the recently weak shares of Intel (INTC - Free Intel Stock Report) and Chevron (CVX - Free Chevron Stock Report) producing the biggest percentage gains thus far.

The eyes and ears of investors were clearly focused on Fed Chairman Bernanke’s latest commentary on monetary policy this morning. Those expecting some sort of action on the part of the lead bank were disappointed. However, Mr. Bernanke, much like has been the case in recent policy updates, has left the door open for another round of bond buying, if necessary. Our sense is that next Friday’s report on employment and unemployment could play a big role in what direction the central bank takes when the Federal Open Market Committee meets on September 12th and 13th. In his latest speech, the Fed Chairman termed the current employment picture “grave.” Still, right now it appears that the Fed does not believe the added benefits of another round of bond buying is worth what such measures would ultimately cost. Too, recent economic data, including today’s reports of growth in factory orders and a jump in the University of Michigan's final Consumer Sentiment Survey for August, have been better.

Meanwhile, there was some noteworthy stock price movement in the technology sector. At the forefront was a weaker outlook from a number of Wall Street analysts for social media giant Facebook (FB). Specifically, the stock is expected to be hurt by weaker ad revenues and the expiration of "lockups" or more insiders being permitted to sell their shares in the coming months. Consequently, the stock hit a new low this morning. Conversely, shares of fellow technology company OmniVision Technologies (OVTI) are sharply higher after the supplier of CMOS-based imaging chips to the cellular phone and surveillance markets reported strong July-period results.

From a sector standpoint, leadership is being shown by the basic materials and energy groups. The aforementioned rise in Chevron, along with nice showings from the stocks of ConocoPhillips (COP) and Schlumberger (SLB), are driving energy stocks higher. In the basic materials space, steel, precious metals and construction materials names are currently in favor. Overall, all of the top-10 sectors are now in positive territory, with utilities the last to join the party.

Meantime, as trading moves into the final stage on Continent, the major European bourses are notably higher, with gains of more than 1% for both Germany’s DAX and France’s CAC-40. Much like the U.S. indexes, the European bourses moved higher again after brief selling following Mr. Bernanke’s speech. A report from the Continent suggesting that Spain has approved the creation of a bank that would take over the country’s bad loans was also greeted favorably by investors. The investment community is also encouraged that the European Union plans to make the central bank the sole authority in granting bank licenses.

Turning back to the United States, trading volume is likely to be light in the second half, as many traders will look to get a jump on the long-holiday weekend. Such a scenario can often lead to a step up in market volatility. However, our sense is that it will be hard to knock the bulls—who already brushed aside a blow earlier this morning—from the catbird seat before the final bell tolls. - William G. Ferguson 

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

 

10:40 AM ET -  The stock market opened strongly higher this morning, which was not surprising given the pre-market surge in the equity futures. What sparked the early morning surge in optimism and the subsequent stellar rise just after the market opened were expectations by some traders that Federal Reserve Board Chairman Ben S. Bernanke would use the backdrop of a symposium at Jackson Hole, Wyoming this morning to encourage the launch of a third round of quantitative easing.

The rationale for such an effort has been the argument that the economic upturn was still proceeding at too slow a pace to ensure its durability. The external influences on growth over here are not all that good, notably slowing GDP activity in China and the increasingly broadbased recession in Europe. Thus far, we have largely withstood those ill winds, which is not to say that our own expansion has been going along at a good clip. However, after a succession of generally weaker data points in the second quarter, which culminated in a dispiriting 1.7% increase in GDP during that three-month stretch, the business metrics have been notably more supportive in more recent weeks.

These better numbers have been largely, but not exclusively, evolving on the housing front, where we have seen building permits, new and existing home sales, and builders' confidence all on the rise. We've also seen better numbers on the retail, industrial production, and even the employment front. Nevertheless, there remains considerable doubt about the up cycle's staying power among both Fed watchers and Fed officials. Thus, the case for more easing has been made.

Now, following a mixed report just moments ago on manufacturing activity in the greater Chicago area (the overall index showed a slightly slower growth rate, but better numbers as far as new orders and employment were concerned) and a supportive issuance on factory orders just afterwards, Mr. Bernanke has intoned that the Fed would act to provide further stimulus as needed. However, he also indicated nothing specific in his remarks, though he did acknowledge that progress in bringing down the U.S. unemployment rate was simply too slow. Again, it should be noted that while he is leaving open the door for further moves, he is not specifically signaling that any monetary easing is imminent.

His words were not taken hopefully by the stock market--at least at first. Thus, after racing ahead to an early gain of more than 120 points in the Dow Jones Industrial Average, and close to a 30-point advance in the NASDAQ, the market then sold off following his remarks. Now, though, stocks are on the way back, as, perhaps, traders are taking a second look at things. Specifically, as we write this, the Dow is now up by 85 points, after having given back almost all of that initial 120-point advance, while the NASDAQ, which had fallen into the minus column briefly, is now back up by seven points, as some calmer heads start to prevail, perhaps. We will see where we go from here. In any event, with volume low as many leave for the long Labor Day weekend, volatility could be high. 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.     

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Stocks to Watch from The Survey News out of the corporate world is rather light ahead of the Labor Day holiday weekend. There are a few stocks that could see particularly active trading today, however. Shares of OmniVision Technologies (OVTI) are moving sharply higher in the premarket, after the supplier of CMOS-based imaging chips to the cellular phone and surveillance markets reported strong July-period results. In addition to reporting July-quarter financials, SAIC (SAI), a provider of scientific, engineering, and technical services, has announced plans to split into two public companies in order to separate its government-services business from its national security, health, and engineering units. The stock is trading higher in the premarket on the news. However, investors were much less enthused with July-quarter financials from Zumiez (ZUMZ), a retailer of action sports-related clothing and equipment. Adjusted earnings were solid, but August same-store sales fell a bit shy of expectations, and the stock is down notably in pre-market trading. – Matthew E. Spencer

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

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Before The Bell - The bull lost some strength yesterday, as investors focused less on decent economic news at home to concentrate, instead, on worries that Federal Reserve Chairman Ben S. Bernanke would not deliver today when he speaks at a symposium in Jackson Hole, Wyoming.

Specifically, the day began hopefully enough--in spite of losses in the European bourses--when the U.S. government reported that personal income and spending had both risen nicely in July, gaining 0.3% and 0.4%, respectively, for the month. Those gains easily eclipsed the May and June performances and were consistent with the generally better tone exhibited by the majority of economic reports over the past several weeks.

However, those metrics did not excite investors, who focused, instead, as noted, on Chairman Bernanke's upcoming talk at Jackson Hole. Essentially, what the market's bulls are hoping for is some indication that the central bank will soon initiate a third round of quantitative easing as a way to further bring down already historically low long-term interest rates. In short, what this possible QE3 would do is to make bonds more scarce, after the government presumably purchases them, and drive interest rates still lower. The hope would be that these lower rates would induce more aggressive home and auto purchases, among other big ticket items, as a way to boost employment and the chief consumer markets.

On the other hand, auto demand is already strong and housing is clearly on the mend, as recent supportive data indicate. Thus, the case for QE3 is not as obvious as it was with QE1 and QE2. So, we will see what the Fed Chairman says today.

In the meantime, the market settled back to a rather material loss yesterday, with the Dow giving back 107 points, to close at just over 13,000. The Standard and Poor's 500 Index also lost ground, with that composite closing just below the technically important 1,400 level. It wasn't a rout of notable proportions, to be sure, but it was a fairly good sized retreat in a stock market that has risen in almost a straight line since June.

Meantime, the news from overseas grows more bleak by the day. Not only is China's growth slowing, for example, but now that country is seemingly facing a pickup in inflation, which may induce the central bank there to keep interest rate reductions on hold for a time, Then, there is Europe, which is falling further along the slippery slope toward an almost all-encompassing recession. To wit, the unemployment rate across the 17 countries that use the euro, the battered regional currency, remained at a record high 11.3% in July. Understandably, consumer and business confidence is at a low ebb. Worse, youth unemployment is becoming a massive social problem, standing at 52.9% in Spain for those under 25 years of age, and at 53.8% in Greece. It is not a pretty picture.

Finally, the focus, as noted, is now on Mr. Bernanke and whether or not he will deliver. The betting yesterday was that he would not; the sense today is rather different, as the U.S. stock index futures are advancing along a broad front today, with the S&P 500 Index futures now ahead by 13 points and the NASDAQ futures better by 26 points. His speech is set for 10AM (EDT), so we may know more at that time. Our guessing is that he will leave the door open for some further moves on the monetary front, but not actually take any definitive steps at this time. We shall see. 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.