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After the Close - The U.S. stock market put in a weak session today. True, major averages did manage to stabilize somewhat in the afternoon, but fell well short of any meaningful rebound. At the end of the day, The Dow Jones Industrial Average was off 129 points (-1.0%); the broader S&P 500 Index was off nine points (-0.6%);  and the NASDAQ  surrendered  13 points (-0.4%). Market breadth was negative, as declining issues outnumbered advancers by roughly 2 to 1 on the NYSE. Nonetheless, these statistics could have been much worse, suggesting an orderly market, as opposed to a major selloff. In fact, traders were not really too panicky as the VIX, which ended at roughly 16, did not spike too much. This may signal that bullish sentiment remains intact. Most of the market sectors traded lower, with losses in the energy, conglomerate, and consumer stocks. However, the declines in these groups were not really too severe. Further, some relative strength was found in the transports and the financials, which slipped just slightly.

Technically, the S&P 500 Index has been pulling back lately, and today marks its fourth consecutive decline. The Index is now close to its 50-day moving average, located at roughly 1,425. We could see some support at this area, which is about 4% down from the 52-week high of 1,475 reached in mid- September.  If the index heads lower from there, it may find some support near 1,400, which likely holds some “psychological” significance for investors.

There were a few economic releases put out today. Specifically, wholesale inventories for the month of August came in more or less as expected. Also, the Fed’s Beige Book summation for September did not hold too many surprises. Instead, much of the market weakness today reflected concerns about third-quarter earnings season. Notably, Alcoa (AA Free Alcoa Stock Report) kicked off the earnings parade yesterday afternoon. Even though profits exceeded analyst expectations, investors were not impressed, as that issue was off almost 5% today. Moreover, the news may have caused related selling in other metals issues. Also of importance, Chevron (CVX Free Chevron Stock Report) stock was off sharply, after the company warned that its third-quarter profits would probably be soft. This issuance dragged down related equities in the energy area. Nonetheless, all the news was not bad. FedEx (FDX) saw its stock rise, after the transportation giant confirmed its outlook.  - Adam Rosner

At the time of this article's writing, the author had a position in Alcoa (AA).
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3:00 PM EDT - The bears are looking to make it two in a row today, as those perennial pessimists are taking stocks notably lower--especially the Dow Jones Industrial Average.

Specifically, one day after that 30-stock composite of blue chip companies fell by 110 points, the sellers have taken the Dow down by more than 125 points with about an hour to go before the close of the current session. In contrast to yesterday, however, the other averages, notably the NASDAQ, has fared better. Indeed, where as that tech-heavy index had shed some 47 points yesterday, the NASDAQ is off a much more moderate 15 points today. The Standard and Poor's 500 Index, a 14-point loser yesterday, is off by nine points currently. The small and mid-cap indexes also are in the red, albeit modestly.

Worries about corporate earnings as third-quarter reporting season gets under way, concerns about the poor pace of economic activity in Europe and across parts of Asia, uncertainty as the so-called fiscal cliff of mandated tax increases and spending cuts draws ever nearer, and the issuance of a listless Beige Book economic summation within the past hour are combining to send stocks to near their lows for the session.

In sum, we are still well away from a correction in the market, which would be a 10% drop in the leading equity averages from their recent peak. However, stocks are still somewhat overbought in the short run and perhaps ripe for some near-term profit taking in what we still believe is a durable bull market.   - 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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12:15 PM EDT - After starting out the day lower, the U.S. equity market tried to rally in mid-morning, but this half-hearted attempt is now faltering as we reach the midday hour on the East Coast. Indeed, this selling looks to be intensifying. The bears, prompted by a subpar report from Alcoa (AA Free Alcoa Stock report) after yesterday’s market close and continued worries about the health of the global economy—the International Monetary Fund and the World Bank have recently cut world growth forecasts, citing concerns about China's slowdown—seem to be a bit more emboldened right now. The spread between advancing and declining issues has widened in recent trading, with a lead for the latter on both the Big Board and the NASDAQ.

This morning, third-quarter earnings season was on the minds of investors. As noted, shares of Dow-30 component Alcoa are lower after the aluminum giant reported a third-quarter loss and lowered its 2012 forecast for growth in aluminum demand. The bellwether company is considered a gauge of how economy is likely to fare in the months ahead—and investors could not have liked what the company had to say. Another concern that is weaker today after reporting quarterly results is Avnet (AVT). Shares of the electronics company fell sharply after it slashed its first-quarter guidance, citing macroeconomic concerns. But we have had some positive reports, as well. The stock of shipping giant FedEx (FDX) moved higher after reaffirming its second-quarter and full-year guidance and announcing a program designed to produce $1.7 billion in annual profit improvements by the end of fiscal 2016. Meantime, Costco (COST) is on the rise after beating on earnings. The mixed earnings news is probably why investors have yet to take a decisive stance in either direction—though it appears that the bears are indeed trying.

The rather guarded behavior on the part of investors this morning may be due to continued uncertainty about upcoming earnings and the global economy. We will get more insight into the health of the world’s largest economy at 2:00 P.M. (EDT) when the Federal Reserve releases its latest Beige Book summation of current economic conditions. Earlier today, we learned that wholesale inventories had increased by 0.5% in August—the consensus expectation had called for a 0.6% increase.  This data may suggest that companies are tempering stockpiles as the impasse over U.S. fiscal policy clouds the outlook for demand through the end of the year. If this trend were to continue, inventories would contribute slower to economic growth.

From a sector perspective, the transportation sector is the best performer among the major groups. This is not surprising given the favorable reaction to aforementioned FedEx news. Shares of Union Pacific (UNP) and United Parcel Service (UPS) are also up slightly today. The transports, along with services stocks, are the lone bright spots, though, right now. Conversely, the basic materials, healthcare, capital goods, and energy are among the biggest laggards. A profit warning from oil giant Chevron (CVX - Free Chevron Stock Report) is weighing heavily on the performance of the energy sector thus far today. The dour outlook from Chevron, along with the aforementioned weakness in Alcoa stock, are the primary reasons why the Dow Jones Industrial Average is performing relatively worse than the broader S&P 500 Index and the tech-heavy NASDAQ.

Looking ahead to the second half of day, we do expect trading to pick up after the Federal Reserve’s Beige Book summation is released. The global economy has been a hotbed topic for investors in recent weeks, and our sense is that additional insight into the health of the world’s biggest economy and what the U.S. monetary policymakers are thinking will be more fodder for either the bulls or the bears to make a case for themselves.   - William G. Ferguson

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 - Dow-30 member Alcoa Inc. (AA - Free Alcoa Stock Report) reported a loss for the third quarter, but the New York-based aluminum manufacturer’s results managed to come in ahead of analysts' consensus expectations for both adjusted earnings (after backing out a couple of one-time items) and sales.

The U.S. Justice Department has asked for further information in conjunction with the pending merger of National Oilwell Varco Inc. (NOV) and Robbins & Myers Inc (RBN). The agency’s request relates to NOV’s pending all-cash offer to acquire all the outstanding shares of Robbins & Myers for $60 a share, in line with its oversight duties under the Hart-Scott-Rodino Antitrust Improvements Act.

Ferro Corp. (FOE) has lowered its profit outlook for 2012 and announced that it is exploring strategic options for its business, which makes conductive pastes used in the production of solar cells. The company now sees 2012 earnings in a range of 7 cents-12 cents a share on an adjusted basis. Previous calls had been as high as 20 cents.

Dow-30 component and energy giant Chevron (CVX - Free Chevron Stock Report) said September-quarter earnings will come in substantially lower on a sequential basis, reflecting decreases in this company’s upstream and downstream businesses. A projected drop in production is largely the result of Hurricane Isaac, and prices generally weakened.   - Erik M. Manning

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 bear is apparently back--at least for one day, as the stock market sold off rather abruptly and sharply yesterday following an uneven start to the week on Monday. The principal carnage took place on the NASDAQ, which lost 1.52%, while the Standard and Poor's 500 Index shed 0.99%. Meanwhile, the Dow Jones Industrial Average, which had a couple of winners on the day, led by defensive stalwart McDonald's (MCD - Free McDonald's Stock Report), eased by just 0.81%, although that still left it down 110 points for the session.

The reasons for the latest selloff were varied, starting with a wave of profit taking after a long upward climb. Also, there was a warning about a continuing slowdown globally from the International Monetary Fund. According to that key source, economic activity is faltering around the globe. Indeed, some pundits now put the odds of an all-encompassing recession in the troubled euro zone at some 80%. 

At the same time, there are concerns about stumbling growth at home. True, we do not seem in danger of falling into a recession on these shores in the months to come, but there is no denying that business activity is not all that strong over here. Moreover, there are lingering concerns about the potential ``fiscal cliff'' of mandated tax hikes and spending reductions that would kick in at yearend if Congress does not act after the election to make the necessary adjustments to prevent this fiscal calamity.

Other worries yesterday included concerns about the start of third-quarter earnings season, which officially got under way after the market's close yesterday afternoon, a sharp selloff in the shares of tech-icon Apple Inc. (AAPL), which exceeded 2% at one point in the latest session and 10% from its recent all-time peak, and some unnerving of the bulls, as we reached the five-year anniversary of the peak of the last bull market. Specifically, it was on October 9, 2007 that the Dow Jones Industrial Average closed at a record 16,164.53. The Dow then proceeded to tumble some 7,500 points in the next 17 months. It has taken the better part of three and a half years to make up much of the lost ground. 

As for Apple, the stock officially fell into correction territory early yesterday falling more than 10%, overall, from its recent record high of $705.07. And while the stock did make up a portion of that early decline, it still closed some 70 points below the $705 peak. The sellers also were put on notice by material declines in two tech names on the Dow, Intel (INTC - Free Intel Stock Report) and Microsoft (MSFT - Free Microsoft Stock Report). These issues fell on a generally poor day for tech. Notably, Texas Instruments (TXN), like Intel a maker of chips or semiconductors, slipped rather noticeably.

As to earnings, as noted, yesterday marked the official start of third-quarter reporting season. The company that commenced this quarterly rite of passage on Wall Street was aluminum giant Alcoa (AA - Free Alcoa Stock Report). That old-line industrial concern had been expected to post breakeven results. And although it posted a loss on a GAAP basis, the company, excluding unusuals, managed to ink a small profit on surprisingly strong revenues. Initially, that report sparked some buying in the downtrodden Dow-30 component, with the issue rising by an early 2%. However, in the pre-market this morning, the shares are indicating a lower opening, suggesting that a weak assessment of upcoming quarters may have dulled the early enthusiasm.

As to other news, the economic calendar is again light today. However, the Federal Reserve Board's Beige Book is due for release this afternoon, and that always makes for some interesting reading. That report will precede scheduled data on the international trade deficit and the Producer Price Index tomorrow and Friday morning, respectively.

As to the markets, they were off overseas and very early in the morning had pointed to a modestly lower opening in the United States. Now, however, the futures are showing more of a mixed pattern, implying an uneven start to the day following yesterday's relatively steep setback.   - Harvey S. Katz

At the time of this article's writing the author had positions in INTC.