Loading...
 

After the Close -  The U.S. stock market traded sharply lower today.  At the close, the Dow Jones Industrial Average was off 130 points (-0.9%); the S&P 500 Index declined 17 points (-1.2%); and the tech-heavy NASDAQ, which was badly bruised, closed off 48 points (-1.5%).  The selling was not confined to the large stocks either, as the Russell 2000, a small-cap index, also slid about 1%. Market breadth was decidedly negative, as declining stocks outnumbered advancers by about 3 to 1 on the NYSE. All of the market sectors retreated today, with especially sharp losses in the energy stocks.  Notably, the price of crude oil fell over 1% to $96.28 a barrel, which likely did not help matters. The technology issues were also weak, with the Philadelphia Semiconductor Index (SOX) down over 1%. On balance, the utilities held up better than the broader averages, as investors were less reluctant to sell these higher-yielding issues.

Technically, today’s move pushed the averages back below some key levels. Specifically the S&P 500 Index closed just below the 1,500 mark, while the Dow fell under 14,000. Traders made a minor attempt to lift the Indexes at the end of the day, but that ultimately proved unsuccessful. That was clearly not a bullish sign.  Moreover, traders became a bit more fearful today, as the VIX shot up almost 14% to above 14. Flight to safety was apparent in other areas too, as investors bid up the price of gold, and scooped up Treasuries, sending the yield on the 10-year note down to 1.97%.

The selling today probably had its genesis overseas.  In Europe, the markets put in an abysmal session. France’s CAC 40 was off over 3%; Germany’s DAX was off 2.5%; and Britain’s FTSE lost 1.6%. Meanwhile, the euro fell 1% to $1.35. The cause was political uncertainty in the region, specifically in financially-challenged Spain.

There was little economic news out today, though factory orders did rise 1.8% in December, which was a bit less than the consensus forecast, but better than the decline posted in November. Meantime, we will get the releases of the ISM’s non-manufacturing survey result.

The fourth-quarter earnings reports can still act as a potential catalyst, even though many big names have reported. Today we heard from Clorox (CLX). That issue was higher after the company put out a favorable report. In merger and acquisition news, Acme Packet (APKT) shares rose on news that the company will be bought by Oracle (ORCL).  - Adam Rosner

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

-

12:00 PM EST - The new trading week began with the major U.S. equity indexes, particularly the Dow Jones Industrial Average and the S&P 500 Index, testing their all-time highs. Such levels, in our opinion, have left the indexes ripe for some profit taking and that seems to be the case today. Renewed worries about Europe (more below) and some uninspiring data on the U.S. economy are the primary culprits behind today’s selloff. Thus, as we pass the midday hour on the East Coast, the aforementioned indexes, along with the NASDAQ, Russell 2000, and the S&P Mid-Cap 400 Indexes are well into negative territory.

Indeed, the selling has been wide-ranging thus far today, with each of the 10 major sectors currently in the red. The biggest laggards are energy, financial, and industrial stocks, with notable weakness in Dow-30 components of Exxon Mobil (XOM - Free Exxon Mobil Stock Report) and Chevron (CVX - Free Chevron Stock Report), as well as the heavy equipment makers. The latter group of stocks, which includes the likes of 3M Company (MMM - Free 3M Stock Report), General Electric (GE - Free General Electric Stock Report) (also both Dow companies), and Emerson Electric (EMR), are weaker after data were released this morning showing that December factory orders rose 1.8%, which was below expectations. The factory orders report is one of the few notable economic readings we will receive this week. Overall, most companies with close ties to the health of the global economy are today.

Meanwhile, there was some earnings news of note to hit the newswires this morning. Shares of household goods maker Clorox (CLX) moved higher after the company beat expectations on both the top- and bottom-lines in the fiscal second quarter and raised its earnings guidance for the full fiscal year. Likewise, the stock of Humana Inc. (HUM) is up after the health insurer reported decent fourth-quarter results. Meantime, the stocks of Yum Brands (YUM), Baidu (BIDU), and Gilead Sciences (GILD) are mildly weak ahead of the release of their latest quarterly results, which are due after today’s close.

Investors also received some merger and acquisition news this morning. Specifically, technology giant Oracle (ORCL) announced plans to acquire networking company Acme Packet (APKT). Shares of Acme Packet jumped on the news, while the stock of Oracle was down more than 1% following the announcement. The tech sector also got a bit of a boost from shares of BlackBerry (BBRY). The company, formerly known as Research In Motion, began trading under its new ticker today.

Elsewhere, investors did not like what they were hearing from the other side of the Atlantic today, where the European bourses are lower as signs of political uncertainty resurface in Spain and Italy, two of the euro zone’s weakest economies. As trading draws to a conclusion on the Continent, European stocks are holding their biggest losses in three months, with sharp retreats in Germany’s DAX and France’s CAC-40, to the tune of nearly 3% for the latter.

As we have opined here in recent weeks, the world equity markets are clearly overbought right now and any negative news either on these shores or abroad could prompt some profit taking. Today’s renewed worries about the euro zone are just the type of news that could unsettle an investment community and produce some selling, especially with U.S. economic and earnings news rather light to start the week. Stay tuned   - William G. Ferguson

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 - Earnings news is light this morning, though there are a few companies announcing results. Among them is health insurer Humana Inc. (HUM), which reported decent fourth-quarter results, sending its shares up modestly in the premarket. In other news, aerospace and defense giant Boeing (BA - Free Boeing Stock Report) is reportedly in talks with Japan Airlines regarding compensation related to the recent grounding of one of its 787 jets. Also, Entergy Corp. (ETR), an electric company providing services to 2.7 million customers in several states, including Louisiana – and most specifically, the city of New Orleans, is in the spotlight this morning following a major power outage at the Mercedes-Benz Superdome, in that city, during the Super Bowl last night. - Kathryn M. Drew

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

-

Before The Bell - The Dow Jones Industrial Average, buoyed by a late push on Friday, managed to cross the 14,000 mark and stayed there for the first time since 2007. After that earlier joyride, the 30-stock composite of mostly blue chip stocks fell more than 50%, getting back down to the mid-6000 range on a collapsing housing market, plummeting earnings, near-ruinous setbacks in the financial sector, and the worst contraction in the economy, in many respects, since the Great Depression.

Now, much of those earlier problems are behind us. The housing sector is on the mend; stocks have doubled in price and then some since early 2009; the banking and financial arena has passed its worst point, although it remains somewhat problem plagued; and the economy, albeit not in great shape, is at least on something of a roll and should get better as the year unfolds. Thus, the basic ingredients for a successful run to 14,000 in the Dow would seem to be in place.

Now that we are there, the logical question is whether or not this will be a lengthy stay and, if it is, just how far above that latest psychological barrier will we go? Of course, whenever such a milestone is reached, the pundits are never in short supply, and as many so-called experts as there are, there may well be even more opinions. The consensus this morning is that the Standard and Poor's 500 Index, now at 1,513, may go to 1,700. Of course, there were those, at Dow 6,500 who felt that we were on the road to 4,000.

In truth, though, the market has done this well with only mild support from the economy. But that may be the stock market's secret, as the lack of any overheating on the business front could well lead to the expansion's longevity. And, indeed, we sense that this will be a long up cycle, perhaps lasting through much of this decade. We saw such a long lived advance during the 1990s, when once the ball started rolling in 1991, it largely did not stop until 2001, save for some incremental gyrations along the way, which we believe are normal and likely to again occur from time to time during the current up cycle.

Also, corporate earnings are doing just fine, notwithstanding the listlessness of the aggregate business expansion; housing is in the formative stages of what should prove to be a durable upturn; inflation is abnormally low, and that should prove supportive; and the Federal Reserve is in their pitching, which is always welcome. So the bulls would seem to have a reasonable case for their optimism. But things often have a way of not working out according to design. Thus, although we can see a path through to further highs, and it may be too much for the bears to get into the way of this oncoming engine, how long we stay on this ebullient path and how far into uncharted territory we go may be less clear. Our sense is that we will go higher, but at some point, the market will pause, at least, and retrace some of this easily taken ground.

As to the here and now, the week ahead will be largely uneventful from an economic point of view, with just reports out on factory orders this morning, non-manufacturing activity tomorrow, productivity on Thursday, and the international trade situation to close out the week on Friday.

Finally, there seems to be little euphoria in the markets this morning so far, with the European bourses largely to the downside and with our futures pointing to a rather nasty opening when trading commences on our shores in less than an hour from now, with respective seven and 15-point declines in the S&P 500 Index futures and NASDAQ futures. – Harvey S. Katz

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