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After the Close - The major U.S. indexes started the session in the red, remained modestly in negative territory during the middle hours of the trading day, and then sold off during the final few hours. The notable late-day selloff took place shortly after the minutes from the latest Federal Open Market Committee were released at 2:00 P.M. (EST). Investors were rattled by the report, which hinted that the Federal Reserve may have to slow or stop buying assets before seeing a major pickup in hiring.

By the closing bell, the Dow Jones Industrial Average, the NASDAQ, and the broader S&P 500 Index were down 108, 49, and 19 points, respectively. Weakness in the technology sector, prompted by a dour earnings report from struggling maker company Dell (DELL), was the main reason why the losses were proportionately more pronounced for the tech-heavy NASDAQ. It should also be noted the for the first time in many trading sessions, declining issues finished overwhelmingly ahead of advancers on both the Big Board and the NASDAQ, to the tune of more than three-to-one on the former.

Not surprisingly, the defensive sectors fared relatively better today, but even those groups were unable to escape the red ink. Today’s big laggards were basic materials, capital goods, energy, and technology stocks. Within the basic materials space, which was the day’s biggest loser, the chemicals, metals, and mining stocks suffered the biggest declines. A disappointing top-line showing from chemicals producer CFIndustries (CF) also weighed on the materials sector. Other laggards included Freeport-McMoRan Copper (FCX), Monsanto (MON), Newmont Mining (NEM). A weak showing in the commodities markets also pressured the metals and mining stocks today. In fact, prices of the two most closely watched commodities, oil and gold, were down more than 2% in the latest session. Meanwhile … 

We received some important data on the U.S. economy today. At 8:30 A.M. (EST), we learned that January housing starts and building permits, though off modestly on a sequential basis in the case of the former, were still well above prior-year levels. It was another sign that this important cog of the U.S. economy continues to recover. However, investors may have been expecting more from the homebuilding market, as shares of the major builders sold off on the news. A miss at the top and bottom lines for Toll Brothers (TOL) in its quarterly report (issued this morning), also did not help sentiment. Meantime, we also received another benign report on inflation when the Labor Department reported only a modest (+0.2%) increase in prices at the producer level. The Department’s companion report on consumer prices is due tomorrow morning.

As we have opined here on several occasions over the last fortnight, the market was clearly overbought and thus susceptible to any negative news, which appeared to come today in the form of comments from Federal Open Market Committee members. While the Fed voted last month to maintain its third round of quantitative easing at the $85 billion monthly pace, there was some discussion among Fed officials at the two-day monetary policy meeting that the central bank may have to slow or even stop buying bonds before seeing the dramatic pickup in hiring, which is the primary objective of the aggressive bond-buying program.  The Fed news jarred investors—and not surprisingly market volatility picked up in the second half of the session. The S&P 500 Volatility Index (or VIX), which started the week at 12.46, jumped more than 15% to end the session above 14.63.  - William G. Ferguson

At the time this article was written, the author did not have positions in any of the companies mentioned.

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12:00 PM EST - Unable to draw support from the morning’s mixed economic data on housing and inflation, stocks are moderately lower just past the noon hour on the East Coast. Specifically, the Dow Jones Industrial Average is off 35 points and the NASDAQ is down 21 points. The downturn is reflected in the broader market, with decliners outpacing advancers by nearly a two-to-one margin on the Big Board.

Trading in Europe, where most markets headed lower, didn’t help, either. And although stocks in Asia pushed higher overnight, that may have been a reflection of yesterday’s modest move to the upside here in the United States.

Meantime, the excitement over merger and acquisition activity has temporarily died down. True, Office Depot (ODP) and Office Max (OMX) made their deal official today, with the former proposing to take over the latter, but that move had been largely anticipated.
Perhaps the day’s biggest story is the fall in the price of gold below $1,600 an ounce. Since the financial crisis, gold has enjoyed tremendous interest as a store of value, with its quotation reaching close to $2,000 an ounce in 2011.

Gold has benefited in recent years from the innovative Federal Reserve policy of quantitative easing, which is seen by many as devaluing the dollar. The difficulties in the European Union that created concerns that the euro zone might break up, and its member nations abandon the euro as its currency, also pushed gold prices higher. Now, though, investors are seemingly starting to look past the troubles that led to gold’s rise, although there could still be some periodic disruptions that create the need for a safe haven, such as gold.

With gold prices moving lower, a number of gold stocks, including industry leaders Barrick Gold (ABX) and Newmont Mining (NEM) have probed fresh 52-week lows. In addition, the broader basic materials sector’s weakness is continuing, with shares of miners BHP Billiton (BHP) and Freeport McMoran Copper & Gold (FCX) pulling back. Stocks of some other basic materials companies, such as U.S. Steel (X) and Alcoa (AA - Free Alcoa Stock Report) are off notably on a percentage basis, as well.

Relatively speaking, the day’s best performing sectors are healthcare, utilities, and consumer staples, where shares of companies, such as Merck (MRK - Free Merck Stock Report), American Electric Power (AEP), and PepsiCo (PEP) are trading to the upside.

Overall, the shift to less volatile sectors indicates the market is clearly on the defensive as the afternoon session gets under way. Some profit-taking is to be expected after the market’s big run since November, too.   - Robert Mitkowski

At the time this article was written, the author did not have positions in any of the companies mentioned.

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Stocks to Watch from The Survey In a highly anticipated move, office supply companies OfficeMax (OMX) and Office Depot (ODP) have decided to merge in an all-stock deal. Under terms of proposed transaction, Office Depot (which also released fourth-quarter results this morning) would issue 2.69 new shares for each OfficeMax share outstanding, which would put a $13.50-per-share price tag on the deal. Both stocks are trading sharply higher in the premarket as a result.

Elsewhere, the earnings parade continues, and shares of homebuilder Toll Brothers (TOL), satellite television provider Dish Network (DISH), hotel operator Marriott International (MAR), nutritional supplement marketer Herbalife (HLF), and navigation and communications company Garmin (GRMN) are all trading lower in the premarket after reporting fourth-quarter results. GRMN stock is showing the most weakness ahead of the bell. On the bright side, shares of furniture company La-Z-Boy (LZB) are indicating a sharply higher opening this morning on earnings news. – Matthew E. Spencer

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

Before The Bell - Wall Street returned from a long weekend yesterday morning and promptly saw the bulls again take the reins in what has become a familiar pattern so far this year. There were no widespread fireworks, to be sure, and there were pockets of weakness, especially in the basic materials arena. However, when all was said and done, this was another strong effort by the market optimists. In all, the Dow Jones Industrial Average and the Standard and Poor's 500 Index each reached new five-year highs, with the Dow's 54-point gain pushing that index once more above the 14,000 mark, a level that it has reached several times, only to fall back on each instance so far.

Still, this is the deepest penetration yet of that high plateau. Now, we shall see if this latest attempt brings some further increases in prices going forward. As for the S&P 500 Index. yesterday's 11-point advance pushed that index further above 1,500, while the NASDAQ, a not-too-shabby 22-point winner, is now above 3,200.

Helping the stock market yesterday was a pickup in deal making, an event that often occurs over a weekend, and can lead to a nice upward push in stocks when trading resumes, such as we saw yesterday. A sharp increase in the price of Google (GOOG) shares to above $800 for the first time likewise emboldened the bulls. Also, investor confidence rose in Germany, and that also helped to lift the spirits of investors. This latter event helped stocks to gain nicely across the Continent. Equities also were higher in Asia and, as noted, on our shores.

Unfortunately, there is no such deal making as yet in Washington, and the deadline for spending reductions draws ever nearer. In fact, we are now just days away from the March 1st mandatory sequestrations. And neither the White House nor the Republicans in Congress seem in a mood to blink first. So, there is a growing sense that we could perhaps go over that cliff, something we did not do late last year on taxes. Alternately, there could be yet another push back of the deadlines for such action. At some point, though, the powers that be in Washington will need to step up and seriously come to grips with this vexing issue. For now, however, only the rhetoric is stepping up.

As for other developments, the government has just issued two key economic reports. To wit, the Labor Department affirmed once more that we do not as yet have an inflation problem on the wholesale or producer front, as the Producer Price Index for January showed a lesser gain (0.2%) for the month than the consensus forecast of 0.5%. At the same time, the Commerce Department noted that housing starts came in at an annualized rate in January of 890,000. That was below the upwardly revised December figure of 973,000 homes begun (initially estimated at 954,000 homes), but was 23.6% higher than the year-earlier total of 720,000 homes started. Note that all figures are on an annualized basis and are seasonally adjusted. Housing has been leading the recovery, and this latest data, albeit a touch disappointing does not alter the fact that housing remains in the vanguard of the expansion.

As to the markets, they were generally higher over night in Asia, are mostly mixed in Europe, and are near the unchanged mark in relation to the futures on our shores. Thus, there figure to be few notable surprises when trading commences in New York 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.