Loading...
 

After the Close - Stocks spent today in the red, although a late-afternoon rally allowed the major indexes to close off their session lows. Overall, a few ingredients came together to fuel a bout of profit-taking. One is that the market has had quite run these past few months, and stocks don’t usually go up in a straight line. Periodic corrections are par for the course.

Also on investors’ minds is the upcoming set of government budget cuts set to start taking effect a week from tomorrow. Traders saw how a sharp reduction in defense spending clipped the nation’s GDP in the fourth quarter of 2012. There is a concern that, with both sides digging in, the political parties in Washington won’t be able to reach any sort of agreement to lessen the economic pain that could ensue if no action to avoid the belt-tightening is taken. That could increase unemployment and hurt corporate profits.

And, for the past couple of days, talk that the Federal Reserve may be considering winding down its extraordinarily aggressive monetary policy has created concern that the days of easy money may be numbered.

Top all of that off with the fact that the morning’s economic data was only about as expected, and not overwhelmingly bullish, and it’s clear to see how a pullback could occur.

At the close, the Dow Jones Industrial Average was down 47 points and the NASDAQ was in the minus column by 33 points, or a notably greater percentage than the Dow. Market breadth underscored the tale of the tape, with more than two stocks falling for every one rising on the New York Stock Exchange. Moreover, the number of stocks hitting fresh 52-week highs outpaced those touching new lows by a much smaller margin than has routinely been the case in recent weeks.

There were a few bright spots, though. The session’s big winner was Berry Petroleum (BRY), which has agreed to be acquired by LINN Energy (LINN). The move will boost Linn’s oil reserves during this period of low natural gas prices.

Investors also cheered earnings reports from Dow component Wal-Mart (WMT Free Wal-Mart Stock Report), supermarket operator Safeway (SWY), and TreeHouse Foods (THS), whose shares all rose.

As for tomorrow, there is not much economic news on the agenda, and earnings season is winding down. But the proposed government budget cuts will draw a day closer, providing fuel for the bears. Still, today’s late-session comeback suggests the bullish camp hasn’t thrown in the towel, either. -  Robert Mitkowski

At the time of this writing, the author did not have positions in any of the stocks mentioned.       

-

12:30 PM EST - The U.S. stock market opened lower this morning, and remains weak. Today's poor showing, follows yesterday’s selloff, which gained steam in the afternoon. Moreover, that selling was accompanied by slightly heavier volumes, which is cause for some concern. Unlike in the past, we did not see bargain hunters moving in to support stocks as the session wore on. It will be important to watch traders’ behavior in the afternoon, as this can often be used to measure market sentiment. Technically, the S&P 500 Index is now testing the 1,500 mark, which is likely an area of psychological importance. If the index slips below this level and a correction ensues, we may test its 50-day moving average, located at about 1,475, roughly 2% lower than the current level. The VIX is higher by about 5%, to 15.41 today, suggesting some apprehension may be building. Flight-to-safety behavior is back in vogue, as investors are buying gold and Treasuries.

As we pass the noon hour in New York, the Dow Jones Industrial Average is off 66 points (-0.5%); the S&P 500 Index is down 10 points (-0.7%); and the tech-heavy NASDAQ is lower by 33 points (-1.0%). Market breadth indicates a negative bias to the session, with decliners outnumbering advancers by more than 2 to 1 on the NYSE. All of the market sectors are trading lower, with weakness in the consumer cyclical names and basic materials shares. The transportation and utility issues are off, too, but holding up a bit better than other sectors.

Some stocks stand out today. Dow component Wal-Mart (WMT - Free Wal-Mart Stock Report) is seeing its stock rise, after the retailer issued a strong report. Things are not going as well for VeriFone (PAY). That issue is off sharply after the company issued first-quarter guidance that was well below consensus. Also, Tesla Motors (TSLA) stock is down, after the carmaker posted a wide loss for the fourth quarter.

Meanwhile, the economic news did little to help matters. First, initial jobless claims for the week ended February 16th rose to 362,000 from the 342,000 claims logged in the prior week. The figure also was a bit higher than many economists had anticipated. Then, the Consumer Price Index came in more or less as expected. This was followed by some decent housing market data, as existing home sales for January came in just above expectations. There was, however, a weak showing from the Philadelphia Fed on economic activity in that region. Finally, the Conference Board’s report of leading indicators for January more or less matched the consensus views. - 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 Earnings are in the driver's seat today, and investors are going over a number of reports from high profile companies, including Dow-30 component Wal-Mart Stores (WMT - Free Wal-Mart Stock Report). Shares of the world's largest retailer are trading slightly higher in the premarket, after the company reported better-than-expected January-period earnings. Guidance, however, was lackluster. Conversely, shares of insurer and financial services company American International Group (AIG), restaurant operator The Cheesecake Factory (CAKE), automaker Tesla (TSLA), and engineering and construction company Fluor (FLR) are all indicating lower openings this morning on earnings news. The big loser appears to be VeriFone Systems (PAY), a designer and marketer of point-of-sale electronic payment devices and security software. That stock is plunging in the premarket, after management slashed its forward-looking guidance.

Elsewhere, shares of Sony (SNE) are trading down slightly in the premarket, after the Japan-based electronics giant unveiled the latest version of its video game console, PlayStation 4. And in another bit of M&A news, shares of Berry Petroleum (BRY) are soaring ahead of the bell, on news that the oil and gas company has agreed to be acquired by fellow energy company Linn Energy, LLC (LINE). – 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 - The bulls ran into the proverbial brick wall yesterday, but it wasn't due to some of the usual factors, such as a seriously disappointing economic report, a dour earning release, or an international incident of either a financial or a military nature. Instead, the selling evolved during the afternoon following the release of the minutes from the Federal Reserve's last FOMC meeting several weeks ago.

Of note, it seems as though several inflation hawks within the central bank are suggesting that the established timetable, most likely 2015, for the end of the bank's aggressive bond buying should be moved up somewhat to lessen the risks of eventual financial instability. Specifically, the Fed's stated rationale for trying to provide further monetary accommodation is its intent on helping to lower the uncomfortably high unemployment rate--which now stands at 7.9%--down to 6.5%.

Now, that is certainly a laudatory goal. But, given the slow nature of the payroll expansion now in place, we sense that it could take another two years for that lowered jobless rate to be realized--if not longer. At some point, the bill for all that money being pumped into the system will have to be paid, and it could be a formidable one. Thus, the concerns among some on the Fed. And just the hint of a lessening in the bank's easy money ways was enough to send the bulls into full retreat, at least for one day.

And, indeed, the bears did come on and in an aggressive way, driving the Dow Jones Industrial Average down by 108 points--the biggest setback for that index in more than two weeks--and back below 14,000 in the process. The other averages did even worse, with the NASDAQ plunging almost 50 points, and with the small-and-mid-cap indexes faring even more poorly.

Now, in truth, this was just the minutes of the last FOMC meeting. It was not a statement issued by Federal Reserve Chairman Ben S. Bernanke following a monetary meeting, or even some comments by Mr. Bernanke at a meeting. It may, in fact, be just a case of some occasional musings by the inflation hawks on the Fed. Having said all that, Mr. Bernanke's expected comments at meetings next week will be closely scrutinized to see whether this latest Fed story has some legs. In the meantime, the markets, which were lower overseas overnight, are now suggesting a weak opening on our shores when trading gets under way in less than an hour from now.

Of course, there was other news yesterday. To wit, we saw another tame inflation reading released in the morning, as the Producer Price Index rose just 0.2% in the latest month, a somewhat better result than forecast. Also, data showed that housing starts had dipped in January. But we think this was just a case of that sector being encumbered by bad weather, as building was hit hard in the Northeast and the Midwest, but climbed in the South and the West, where snows were not a factor. Moreover, building permits, which are more of a leading indicator, rose in January.

Meanwhile, in a key inflation report just issued this morning, the Labor Department reported that the Consumer Price Index was unchanged in January, just as it was in December. However, if we back out the volatile food and energy components, we find that the so-called core CPI was up by 0.3%. That is of some concern, but does not suggest in and of itself that the period of benign pricing is at an end, though it does imply that the Fed may be less forgiving going forward if this trend were to persist.

Finally, giant retailer Wal-Mart Stores (WMT Free Wal-Mart Stock Report) has reported its quarterly results, and that Dow-30 component posted better earnings, but weak guidance going forward. Still, the issue is indicated to open modestly higher when the market resumes trading later on this morning. – Harvey S. Katz    

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