After The Close - The bulls responded well to yesterday’s jab from the bears with a combination of their own, in the process retracing most of the prior day’s losses and restoring investor confidence that was rattled a bit by some concerns about the euro zone. Helping matters on these shores was a decent report on the U.S. economy, along with fairly supportive corporate earnings and a sense that calmer heads may prevail in Washington in the upcoming debt-ceiling and spending cuts talks. By the closing bell, the Dow Jones Industrial Average, the NASDAQ, and the S&P 500 Index had added 99, 40, and 16 points, respectively. A strong showing in the small- and mid-cap markets would also suggest that investors are still open to adding risk to their accounts. Overall, advancing issues outnumbered decliners by a wide margin on both the Big Board and the NASDAQ.

From a sector perspective, today was a 180-degree reversal from yesterday’s weak showing. Those sectors among the top-10 groups that were hit hardest yesterday showed resiliency today, with leadership coming from the consumer noncyclical, industrial, and financial stocks. Within the consumer noncyclical group, Procter & Gamble (PG - Free Procter & Gamble Stock Report) and Archer Daniels Midland (ADM) were higher, along with the stocks of the personal care companies, including Revlon (REV) and Estee Lauder (EL). Both beauty products producers reported strong quarterly results before trading opened this morning, citing increased spending on the part of the U.S. consumer.

Speaking of the consumer, we received another important report on the services sector at 10:00 A.M. (EST). Specifically, the Institute for Supply Management, a Tempe, Arizona-based trade group, reported that nonmanufacturing activity registered a solid 55.2 for January, incrementally better than the 55.0 consensus expectation. This reading is closely followed by pundits, as the consumer accounts for roughly two-thirds of the nation’s economic output. Not surprisingly, investors reacted favorably to the latest data and stocks moved higher from their initial strong start to the trading day. 

Meantime, President Barack Obama asked Congress this afternoon to consider a short-term deficit reduction package of tax revenue and spending cuts that would delay the effective date of steeper automatic cuts now scheduled to kick in on March 1st. The request from the President came shortly after the Congressional Budget Office released revised budget projections that showed the deficit will drop to around $845 billion in 2013, which would mark the first time during President Obama's Presidency that the red ink would fall below $1 trillion. Our sense is that some deal will be struck to avoid the looming spending cuts that could potentially damage the U.S. economy. The reports from Washington did not seem to have much of an impact on trading today, however.

In our opinion, today’s win for the bulls, in which a good portion of the early gains were held to the closing bell, was encouraging. It showed that investors are still open to adding their equity positions and yesterday’s difficult session may be more of a one-time blip than the start of a market correction. Even though the stock market is clearly overextended at the moment, earnings and economic news continues to be rather conducive for investors and the possibility of a notable correction for equities remains minimal at the moment, barring talks in Washington becoming very contentious or the euro zone’s financial problems escalating.   - 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 EST - The U.S. stock market is bouncing back today, after yesterday’s selloff. So far, the market is holding its gains, and hopefully we will see some strength continue into the afternoon. Often, traders’ behavior as the close of the session approaches serves as a measure of sentiment, and can be useful to monitor. Technically, the S&P 500 Index is back above the 1,500 mark. The VIX, which spiked yesterday, is also down considerably, suggesting that bullish sentiment is still intact, for now. Hopefully for the bulls, yesterday’s move lower was a minor event, driven by jitters in Europe, and not the start of a correction.  Notably, on the Continent, the markets are closing out a decent session.

As we pass the noon hour in New York, the Dow Jones Industrial Average is up 105 points (0.8%); the S&P 500 Index is ahead by 13 points (0.9%); and the tech-heavy NASDAQ, which is showing some leadership, is tacking on 32 points (1.0%). Market breadth shows a positive bias, as advancing stocks are ahead of decliners by a wide margin on the NYSE. All of the market sectors are making strides, with gains in the capital goods and technology issues especially noted. The energy stocks are ahead, too, but lagging the broader averages.

Some names are also making news today. Yum! Brands (YUM) stock is trading lower after the restaurant company put out a disappointing report.  Things went a bit better for Kellogg (K). That stock is up after the cereal maker issued its results, including positive guidance. We also heard from BP Plc. (BP). The oil company’s quarterly profits were hurt by environment-related costs, but the shares are up, nonetheless. Meanwhile, in merger and acquisition news, Dell Computer (DELL) is looking to be taken over by a private equity group in a $24.4 billion deal. Dell shares are up just incrementally.

Meanwhile, today’s lone economic report was largely constructive this morning. Specifically,the ISM Services Index came in at 55.2 for the month of January, which was essentially in line with expectations. Notably, readings of over 50, suggest that the sector is still expanding. Although tomorrow will be a light day for reports, we will get a better look at the health of the overall economy on Thursday with the release of the weekly initial and continuing unemployment claims.  - 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: Shares of McGraw-Hill Cos. (MHP), the parent company of Standard & Poor’s, are expected to continue  trading lower on news that The Justice Department has filed a civil lawsuit over financial-era ratings put forth by the ratings agency.

Meanwhile, Yum! Brands (YUM) stock is likely to meet some resistance after the restaurant chain announced that safety issues at its KFC division in China are likely to remain a drag on earnings in 2013.

Elsewhere, rumors are swirling that a long-anticipated deal for Dell Inc. (DELL) will be announced this morning. Sources close to the matter say that the board of directors will vote on a $24 billion offer to take the computer giant private. Specifically, the deal on the table values the company at $13.50-$13.75 a share.   - Andre J. Costanza

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 tasted the rarified air above 14,000 on Friday for the first time in more than five years and found it too dense to tolerate. So, it did the logical thing and sold off, and rather abruptly and sharply. To be sure, the overall losses in the latest session did little to counter the equity market's strong showing so far in 2013, but it did remind some traders, if they needed such reminders, that the market does not just go one way.

As to the decline in prices in the latest session, it was partially driven by profit taking, in our view, along with some signs that the delicate situation in Europe is far from being settled on a long-term basis. Thus, with concerns building that Spain is the latest nation to face financial headwinds on the Continent, the principal bourses fell between two and three percentage points yesterday, with Spain's principal index shedding almost four percent. And on our shores, the winding down of earnings season and the overall absence of compelling economic news, save for the report of a decent gain in factory orders in December, Wall Street could afford to focus on events overseas, and to the chagrin of the bulls, that is just what the Street did.

Specifically, the Dow Jones Industrial Average fell 130 points; the NASDAQ, buffeted by outsized losses in some key technology stocks, shed 48 points, or 1.51%; and the Standard and Poor's 500 Index gave back 17 points. The small-and mid-cap indexes also fared poorly, while losers swamped winners on both the Big Board and the NASDAQ to the tune of almost a four-to-one ratio. Among the NASDAQ casualties yesterday were Oracle (ORCL), which dropped some 3% on the day following dissatisfaction regarding an announced acquisition, and Facebook (FB), which has recently seen some renewed profit taking following a spirited run from $17.55 a share to the mid-30's.

Now, we're back to focusing on the economy, for one day at least. with a report scheduled for issuance at 10:00 (EST) this morning on non-manufacturing activity across the country. That snapshot of the services sector, which takes in some two-thirds of the overall economy, is put out by the Institute for Supply Management, an Arizona-based trade group. The expectation is that this report will show continued expansion, with a score of 55.0. That would be a full five percentage points above the dividing line between an expanding services sector and one that is contracting. A month ago, the December reading had come in at 55.7. Last week, the ISM had issued its companion report on manufacturing. That metric noted an expanding industrial base, with more vigor than had been assumed.

As to other news, earnings season is fast winding down, and, for the most part, it has been a good one, which, too, has helped to support the market. With earnings on the rise, the economy performing decently, overall, and the spirit of compromise beginning to make an appearance in Washington, the bullish case is a strong one, especially given that valuations are still historically modest, inflation is low, and the Federal Reserve is supportive. Given all this, we sense that the rally, which was interrupted yesterday, will resume as early as today. In fact, the equity futures are pointing nicely higher with less than an hour to go before the start of the new trading day, with the S&P 500 Index futures ahead by five points and the NASDAQ better by 10 points. As for earnings, the big report of note today figures to be from Walt Disney (DISFree Disney Stock Report), with that Dow-30 component scheduled to report after the close today. – Harvey S. Katz

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