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After the Close - For the first time in what seems like an eternity—especially with the Dow Jones Industrial Average setting daily records over the last week and the S&P 500 Index coming within a stone’s throw of its all-time high—most of the major U.S. indexes, with the exception of the white-hot Dow 30, were in the red today. Now, that is not saying the bears made a major statement, but there was definitely a negative tone to trading for much of the session. There was clearly some profit taking in a market that is just as clearly overextended. Overall, declining issues led advancers on both the Big Board and the NASDAQ.

From a sector perspective, most of the 10 major groups finished in negative territory, with the biggest laggards being the financial, industrial, and technology stocks. Weighing on the latter sector was weakness in the shares of technology behemoths Apple (AAPL) and Google (GOOG). Conversely certain basic materials issues (see below) and healthcare stocks fared relatively better than the rest of the market. In the healthcare space, Dow-30 component Merck & Co. (MRK Free Merck Stock Report) was the notable stalwart performer.

There were some signs of market participants becoming a little more cautious in today’s session. The S&P 500 Volatility Index (or VIX) was up more than 10% at one point in intra-day trading, and investors took a longer look at fixed-income securities. In fact, the yield on the 10-year Treasury note fell three basis points, as bonds were in more demand. The price of gold, which is considered another safe-haven option, rose more than $13 an ounce. Shares of precious metals companies: Barrick Gold (ABX), GoldCorp (GG), and Newmont Mining (NEM) benefited from the spike in gold prices and helped the performance of the basic materials sector.

Meantime, the news on the earnings front was mixed. On the positive side was a good report from Costco (COST). The discount retailer posted better-than-expected earnings and reported revenues in-line with prior guidance. On the other hand, shares of Diamond Foods (DMND) were lower after the food company missed on earnings and revenue, and said it expects sales to slow during the next few quarters.

Elsewhere, it was also a struggle for many of the international indexes. Most of Asia’s bourses finished lower. The economic news, following yesterday’s uninspiring reports from China, today included data showing India's industrial production jumped a weaker-than-expected 2.4% year-to-year last month. On the Continent, the major European bourses strayed little from the neutral line against the backdrop of some disappointing economic news. Specifically, the United Kingdom's industrial output fell 1.2% month-over-month against the expectation of an increase of 0.1%, while Greece’s industrial production declined nearly 5% year-over-year in January. And with uncertainty still looming over Italy’s political scene, a short-term debt auction in the financially struggling nation resulted in a one-year yield of 1.28%, which was up considerably from the prior auction’s yield of 1.09%. Investors have major concerns about Italy’s political and financial leadership right now.

Turning back to our shores, the question on the minds of investors is whether today’s mild setback was the start of a run by the bears or merely a breather for the bulls after a notable rally? Our sense is the forthcoming news on the economy, which includes reports on retail sales, producer and consumer prices, and industrial production this week, will play a big role in what direction trading takes over the next three days. - 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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12:30 PM EDT - The stock market staged a half-hearted attempt to move higher earlier in the day, but has since retreated into mildly negative territory. At just past noon in New York, the markets are quite volatile. The Dow Jones Industrial Average is off two points; the S&P 500 Index is down about four points (-0.3%); and the NASDAQ, which is leading the averages lower, is surrendering 16 points (-0.5%). Market breadth indicates a somewhat negative bias to today’s trading, as declining stocks are outnumbering advancers on the NYSE. Weakness can also be seen in the various market sectors. There are sharp declines in the consumer cyclical, technology, and financial names. However, the basic materials and healthcare issues are showing some selective strength, and are holding up a bit better than the other sectors.

Technically, the market has advanced for a number of days consecutively. So, a breather is understandable, and some profit taking might even be healthy. Notably, volumes have not been so strong lately, and that may suggest that although the market has been drifting higher, some traders are likely sitting on the sidelines. While markets are difficult to predict, in the event of a pullback, the averages may find support at their 50-day moving averages, as they did in late February. Specifically, the S&P 500 could test the 1,500 area, implying a 3.5% move lower. Only time will tell. Looking ahead, the next big event for U.S. corporations, and the stock market, will likely be the conclusion of the first quarter of 2013. As this approaches, there may well be some earnings pre-announcements and renewed guidance being released. Also, the nation’s budget issues are still making headlines, as that situation needs some resolution. Further afield, the situation in Europe, and to a lesser extent Asia is also capable of providing a surprise to investors. Notably, worries about Europe’s financial status caused some sharp market declines over the past couple of years.

There was no economic news released in the United States today. Tomorrow will be busier, with the release of monthly retail sales figures, import and export prices, and business inventories.

There were some corporate reports worth noting today. Specifically, YUM! Brands (YUM) is seeing its stock rise, after that company put out better-than-anticipated monthly sales figures. Also, Urban Outfitters (URBN) stock is rising in a strong quarterly release. But, Diamond Foods (DMND) shares are lower, after the company issued a weak outlook. -Adam Rosner

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 Investors are going over several earnings reports today. Shares of Costco Wholesale (COST) are up moderately in pre-market trading, after the warehouse club reported solid February-period results. Investors were not as pleased with quarterly financial data from apparel and accessories retailer Urban Outfitters (URBN), however, and that stock is indicating a lower opening this morning. Too, shares of nut and snack company Diamond Foods (DMND) are trading notably lower ahead of the bell on earnings news.

Elsewhere, shares of Yum! Brands (YUM) are up nicely ahead of the bell, after the restaurant operator released better-than-expected February sales data. The stock of Verifone Systems (PAY) is also up sharply in the premarket, after the payment terminal maker’s CEO, Douglas Bergeron, said he was stepping down. Finally, shares of Life Technologies (LIFE) are indicating a higher opening today, on reports that KKR & Co. is thinking about joining with other private-equity firms to bid for the biotechnology-related tools company. – Matthew E. Spencer

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 - Chalk up another one for the bulls, as those intrepid optimists lifted the Dow Jones Industrial Average to a fifth consecutive all-time closing high yesterday, with that 30-stock composite gaining another 50 points in an uneven session that saw proportionately smaller gains in several other key equity indexes and no change at all in the small-cap benchmark Russell 2000 Composite.

The session was not altogether smooth, though. In fact, the stock market was lower initially yesterday, but managed to limit its early losses and begin stabilizing shortly thereafter. It then gained ground by late morning. It seems as if many investors, feeling that they are underinvested and not wishing to stay out of the party, are coming back to equities in droves.

Meanwhile, there was little of note on the economic front to spark the interest of traders or investors in the latest session, and that will be the case again today. However, all of this will start to change tomorrow, when the government will report data for February on retail sales, a metric that is projected to show a nice gain on the order of 0.6%. Then, on Thursday, the Labor Department will report on weekly and continuing jobless claims and producer prices. That same agency will then issue its companion report on consumer prices on Friday morning, while the Commerce Department will make its sentiments known, with figures a bit later in the day on industrial production and capacity utilization. The inflation figures, meantime, are likely to be a bit more elevated than the Federal Reserve would like, while the surveys on retail sales and industrial activity should be rather welcome. The economy is picking up momentum, and we sense that GDP growth in the fast-concluding quarter will come in at around 2%, which would be a stellar change from the recent fourth-quarter rise of just 0.1%.

As to the equity markets, they are clearly overbought, with the VIX volatility index now below 12, at 11.56. That is less than half the 27.73 high over the past 12 months, and stands at less than a fifth of the record reading reached at the lows of the bear market in early 2009. All of this would suggest that a selloff, or just even a token amount of profit taking, is long overdue. But we remind investors that markets can remain either overbought or oversold for long periods of time. Also, we believe that even with the strong gains of recent months, stocks are not really overvalued, with the price-earnings ratio just moderately above 16. That is not an unreasonable number, especially in these low inflationary times.

Finally, the markets overseas are fairly near the neutral line in early trading this morning, while the U.S. equity futures are slipping but by just about two points in the Standard and Poor's 500 Index and some six points on the tech-heavy NASDAQ.  The stock market thus would seem ripe for some initial selling, but with momentum clearly on the side of the bulls, and the S&P 500 Index, which closed yesterday at 1,566.22, just about nine points off of its all-time high, the buyers could be back in short order. Stay tuned. – Harvey S. Katz       

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