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After The Close - The U.S. equity market came roaring out of the gate during the first trading session of October. The bulls were clearly in command during the first half of the session, helped by a better-than-expected report on the U.S. manufacturing sector. However, as the day progressed, the major equity indexes lost a good deal of steam and selling picked up in the final few hours, likely prompted by comments from Federal Reserve Chairman Ben Bernanke during a speech today (more below). When all was said and done, it turned out to be a mixed session. The Dow Jones Industrial Average—though well off its intra-day high—was able to hold back the bears and book a nice gain, but the NASDAQ, and the broader S&P 500 Index did succumb to the late-day profit taking, with the tech-heavy NASDAQ finishing slightly in the red. A weak showing from technology behemoth Apple (AAPL) had a lot to do with the NASDAQ’s setback. 

The day’s biggest news came from the manufacturing sector. A half-hour into the new trading week, the Institute for Supply Management, the Tempe, Arizona-based trade group, reported that manufacturing for the month of September was better than expected. Specifically, the ISM Index came in at 51.5, nearly two points above the 49.7 consensus view and the August survey result of 49.6. More important, it was the first since May that the metric was above the 50 threshold, which indicates expansion in this sector. The manufacturing data more than offset a release earlier today showing that construction expenditures fell 0.6% during the month of August. The U.S. data followed a disappointing report from China, which showed that manufacturing in Asia’s largest economy contracted for a second consecutive month, the first time since 2009, and a better-than-expected report on the euro zone’s manufacturing activity. All of the major European bourses finished nicely higher, punctuated by a 2.4% jump in France’s CAC-40 Index.  However, it should be noted that while the region’s PMI exceeded expectations, it remained below 50, which indicates contraction. Moreover, the euro zone’s unemployment rate rose to a record 11.4% last month.

Turning back to these shores, it was a mixed day from a sector perspective. The basic materials, consumer noncyclical, healthcare, and energy sectors were higher today. Aluminum and steel stocks showed some strength today on the semi-encouraging economic data, while healthcare stocks moved higher after a major brokerage house raised its rating for the industry. Conversely, as noted, it was a struggle for technology stocks, as well as the industrials and utilities. 

Meanwhile, Federal Reserve Chairman Ben Bernanke said the central bank plans to sustain record stimulus even after the U.S. expansion gains strength. The Fed Chairman noted that his biggest concern remains the weak labor market, to which we will get more clarity later on this week, with Automatic Data Processing’s (ADP) report on private-sector jobs creation due Wednesday and the government’s report on non-farm payrolls scheduled to be released on Friday. We will also receive data on vehicle sales, nonmanufacturing activity, and manufacturing orders later this week.

As noted here on Friday, we expected the economic news to be the primary driver of trading this week, and if the first day of the new trading week was any indication, such appears to be the case. - William G. Ferguson
  

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

12:30 PM ET - The U.S. stock market opened higher this morning, and is still holding most of its gains. At just past noon in New York, the Dow Jones Industrial Average is ahead 150 points (1.1%); the broader S&P 500 Index is up 12 points (0.8%); and the NASDAQ, which is lagging a bit today, is adding on 12 points (0.4%). The market’s breadth suggests some underlying strength, as advancing stocks are ahead of decliners by almost 3 to 1 on the NYSE. Gains can be seen in almost all of the market sectors, with large advances in the financial, energy, and basic material names. There is no real weakness today, but the utility stocks are showing some relative underperformance.

Technically, the S&P500 Index is looking to advance, after consolidating for several sessions. The Index will have to break through some resistance near the 1,460 area, which proved difficult previously. The third quarter is now over, and the corporate profit reports will soon be released. Assuming the news is positive this could provide the catalyst needed to push the averages higher.

The international markets are offering some help today. In Europe, the major bourses are closing out a strong session, with large gains on France’s CAC-40. A series of better-than-expected manufacturing reports likely helped lift sentiment.

There were few economic reports released in the U.S. today. The Institute for Supply Management (ISM) manufacturing index rose to 51.5 in September, which was better than the figure analysts had been expecting, and ahead of the August 49.6 reading. This issuance was offset by a less favorable reading on construction spending, which slipped 0.6% in August. Analysts had been looking for a small increase. Tomorrow also looks like a light day for economic news, with just monthly truck and auto sales data due to be released.

There was also little in the way of corporate reports to examine today. Nonetheless, JAKKS Pacific (JAKK) is seeing its shares move lower, after the toy maker reduced its 2012 outlook. In energy stocks, Transocean (RIG) stock is moving higher on a favorable legal ruling in Brazil. In merger and acquisition news, 3M (MMM) announced it will be buying Ceradyne (CRDN). As expected, the announcement is sending Ceradyne shares up sharply. Other actively traded stocks moving up include: Facebook (FB) Research in Motion (RIMM), and Nokia (NOK). Stocks moving lower include: Sprint Nextel (S), Peregrine (PPHM), and Wendy’s (WEN). - Adam Rosner

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

11:00 AM ET - The U.S. stock market is rallying strongly this morning as we approach the 90-minute mark of the current trading day. In all, the first day of the fourth quarter and the new week are showing the Dow Jones Industrial Average with a stellar gain of 145 points. The Standard and Poor's 500 Index likewise is on the rise, climbing 13 points, while the NASDAQ is better by almost 19 points. Gains are also being seen on the small-cap Russell 2000 Composite, which is up by almost more than seven points.

Underpinning this impressive performance, which is seeing advancing issues swamp losing equities by almost five to one on the Big Board and by three to one on the NASDAQ, is a surprisingly good report from the Institute for Supply Management issued earlier this morning. That trade group reported that manufacturing activity had increased last month, registering a result of 51.5, or a full percentage point and a half better than the 50.0 threshold separating an expanding industrial sector from one that is contracting. This gain in such activity follows three monthly declines in a row in manufacturing. A fourth contraction had been the consensus forecast.

Armed with this better showing, an early modest gain in the U.S. equity market has turned into a very strong advance, with the key averages all near their respective session highs as we begin the final period of the year following a solid third quarter that generally saw gains of some five to ten percent for the leading equity averages. - Harvey S. Katz, CFA

Stocks to Watch from The Survey There are a number of stocks that are likely to see active trading today. At the top of that list are shares of Ceradyne (CRDN), a maker of ceramic products and components. That company has agreed to be acquired by diversified manufacturer and Dow-30 component 3M (MMMFree 3M Stock Report) for $35 a share, a 43% premium to the issue’s preannouncement closing price. Ceradyne stock is soaring in the premarket. Also in M&A news, another diversified company, Honeywell International (HON), has agreed to pay $525 million for a 70% stake in privately-held Thomas Russell Co., which develops technology and equipment for natural gas processing.

On the earnings front, shares of Cal-Maine Foods (CALM) are indicating a slightly higher opening, after the largest domestic producer and distributor of eggs reported solid August-period results. – 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 U.S. stock market stumbled through a rare down week during the latest five-day stretch on worries about a possible downgrade of Spain's debt, further weakening in the manufacturing sector in China, and ongoing concerns about the health and staying power of the U.S. business expansion. However, this late setback, which included a 49-point drop in the Dow Jones Industrial Average on Friday, still left the Dow up by 2.6% in September and ahead by a little more than that for the third quarter. In all, the Dow is up for 11 of the past 12 months, and by more than 10% for the year. The Standard and Poor's 500 Index is in the plus column by some 15% so far in 2012, while the NASDAQ is ahead by a stellar 20%. It has been that kind of year thus far, as Wall Street has somehow been able to climb the proverbial wall of worry.

Now, the fourth quarter begins, with the latest data showing that the American economy is still bumping along at a depressingly low rate of improvement. Specifically, second-quarter GDP advanced at just 1.3%, while based on such issuances as retail sales, job growth, weekly jobless claims, industrial production, and durable goods orders, our expectation is that third-quarter GDP growth probably did not vary all that much from the weak April-though-June total. Our forecast for the fourth quarter is only incrementally better, with the risks seemingly to the downside at this time.

As to the week ahead, we already have seen evidence of a further weakening in China's manufacturing base, while in our country, we will be getting data on manufacturing activity in less than an hour from now. Expectations are that this sector contracted slightly for a fourth month in a row in September. We also will be seeing August figures on construction spending. Tomorrow, meanwhile, we are due to get the release of data on September auto sales. A flat annualized reading of 14.5 million cars sold is the expectation. This will be followed up on Wednesday by the second report of the month from the Institute for Supply Management when that group issues metrics on non-manufacturing activity. Unlike the aforementioned release this morning on manufacturing, the ISM's non-manufacturing survey is likely to show an increase in such activity for last month, albeit at a slightly lesser rate than for August. We then will get weekly jobless data on Thursday morning, along with August factory orders. Finally, the busy week concludes with the most closely watched economic report of the month when the Labor Department issues its reading on non-farm payrolls and the unemployment rate. Job growth likely quickened a touch from 96,000 in August to 115,000 last month, while the unemployment level is forecast to have held steady at 8.1%.

As to the equity market to start the fourth quarter, the early signs are favorable, as the Standard and Poor's 500 Index futures are currently ahead by seven points, while the NASDAQ futures are better by some 17 points. Our sense is that the market enters the fourth quarter in a mood to go higher, but facing some potential troubling headwinds, such as the pending flood of third-quarter earnings reports, the uncertainties posed by both the weak state of the business expansion at home and the spreading recessions in Europe, and the major risk of the so-called fiscal cliff of mandated spending cuts and tax hikes that is set to kick in at yearend unless the Congress acts in the interim to stave off that potential recession-causing event.

As for this morning, though, the bulls seem to have the upper hand and the futures are pointing, as noted, to a much better opening when trading gets going 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.