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After the Close - The U.S. equity market got off to a rousing start in this holiday-shortened trading week. Specifically, the major U.S. indexes, taking their cues from overseas markets, shot up at start with the Dow Jones Industrial Average climbing more than 200 points in the early going. The success of the index of 30 bellwether companies was matched stride for stride by the NASDAQ and the S&P 500 Index. However, as the trading session moved forward some profit taking emerged, with the gain on the Dow 30 easing to below the triple-digit mark. But then in the final hour of trading, the buying picked up again and the indexes headed higher once again. At the final bell, the Dow 30, the NASDAQ, and the S&P 500 Index had added 106, 30, and 10 points, respectively. Overall, advancing issues held a sizable lead on decliners on both the Big Board and the NASDAQ.

There were definitely some signs today that investors were willing to take on some more risk after becoming a bit more guarded over the last fortnight. The strong showing by the small-cap Russell 2000 illustrated the growing appetite for risk. Meanwhile, fixed-income securities were in less demand. The yield on the 10-year Treasury note, which moves in the opposite direction to the price, jumped sharply. Likewise the price of gold, which is also considered another safe-haven holding, fell. Moreover, the more defensive-minded utilities and telecommunications issues finished in negative territory during the latest session.    

As noted, today’s economic news did not disappoint investors. First, the Standard & Poor's Case-Shiller Home Price index showed that all 20 cities had posted year-over-year growth for the third straight month, the latest sign of how tight inventories and growing housing demand are pushing home prices higher after several years of declines. Specifically, home prices in March rose by 10.9% from a year earlier, the largest such gain in seven years. Then, a half-hour into the trading day, investors received a strong report on consumer confidence for the month of May when the Conference Board, the New York-based research organization, reported that its index jumped to a reading of 76.2. That was well above the upwardly revised 69.0 result registered in April. These two reports were very encouraging, as the consumer accounts for roughly two-thirds of the nation’s economic output and the housing and homebuilding market is a major contributor to the U.S. gross domestic product. Not surprisingly, leadership came from stocks in the economically sensitive energy, industrial, basic materials, and consumer discretionary sectors. 

The earnings news was light today, but the reports we did receive were largely positive. Shares of Tiffany & Co. (TIF) moved higher after the jewelry retailer reported strong quarterly results. Likewise, Jos. A Bank Clothiers (JOSB) posted solid results in the latest quarter; however the release did not give the stock, which has performed very well recently, a boost today.  Investors should note that after the close of trading, United Natural Foods (UNFI), which engages in the distribution and retail of natural, organic, and specialty foods, is scheduled to report its latest quarterly results.

Meantime, as documented above, the tidings from overseas were a big shot in the arm for the U.S. equity market that entered the holiday shortened week after coming off a losing five-day stretch for equities. Specifically, investors who were unnerved last week by growing sentiment that the Federal Reserve may begin to ease up on its easy monetary policies took some comfort in reports that further economic stimulus by the European Central Bank (ECB) remains a possibility. ECB Executive Board member Peter Praet said the possibility of further easing remains on the table despite the recent interest rate cut. Such sentiment is historically viewed positively by market participants, and that certainly seemed to be the case once again today. Germany’s DAX, France’s CAC-40, and Britain’s FTSE-100 finished 1.2%, 1.4%, and 1.6% higher, respectively, for example. - 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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12:15 PM EDT - The stock market is trading sharply higher today, and importantly, the major averages are holding their gains. Ultimately, we will have to see if investors support the rally through the afternoon, as this would suggest a commitment to the move. Also, some follow-through, possibly tomorrow, or in the coming days, would be encouraging. Meanwhile, at just past noon in New York, the Dow Jones Industrial Average is up 156 points (1.0%); the broader S&P 500 Index is ahead by about 16 points (1.0%); and the tech-heavy NASDAQ is advancing 41 points (1.2%). Market breadth shows broad-based buying of equities, as advancing issues are outnumbering decliners over 2 to1 on the NYSE. The statistics are even more encouraging on the NASDAQ. Investors are piling into almost every sector, with especially large gains in the consumer cyclical stocks. The financials are doing quite well. Notably, these issues, while badly battered a few years ago, have rebounded sharply in recent months. Technology shares are also making a large up move. In contrast, traders are selling the utility stocks, as they are likely willing to sacrifice dividend yields, for greater potential elsewhere.

Technically, the S&P 500 Index had logged a series of discouraging days at the end of last week. A momentary pullback was likely warranted, as the market has headed higher with no major pause for months now. Today, it seems the index managed to find some support at the 1,650 mark, and may soon make an attempt to test high ground near the 1,680 level again. Nonetheless, given recent volatility, this process may be choppy. The VIX is moving slightly lower today, and is now at about 13.75. This index, which measure sentiment, has been stuck under 25, a level that is considered neutral, for many months. 

Meanwhile, earlier this morning, investors in the U.S., after a three-day weekend, may have been encouraged by a strong session overseas, as the markets in Asia and Europe were largely higher. Further, some favorable economic news released this morning likely helped, as well. The Case-Shiller 20 City Index, a measure of home prices, rose 10.9% in March. This result, which was better than expected, comes after a large gain in February, and supports the investment idea that the housing market is still rebounding strongly. Also, consumer confidence came in at 76.2 in May, up from 68.1 in April, and better than anticipated. The consumer is giving the economy, and some select companies, a boost as well. For instance, we heard from Tiffany (TIF) today. The upscale jeweler put out a better-than-anticipated quarterly earnings report, sending the stock, along with shares of other jewelers, higher.    - 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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10:15 AM EDT - The bulls have returned to Wall Street en masse this morning following the long Memorial Day weekend, and are clearly making a statement and doing so in a big way.

Specifically, after about a half hour into the new trading day and week, the Dow Jones Industrial Average is roaring ahead to the tune of a 200-point gain, while the Standard and Poor's 500 Index is up by 23 points, and the NASDAQ, underpinned by some stellar gains in the tech sector, is jumping ahead by almost 55 points.

Behind this latest rise in a largely unrelenting bull market appears to be a pledge by the world's central banks to continue bankrolling the somewhat troubling global economies with low interest rates and lots of added capital. This latest pledge comes amid concerns that the U.S. Federal Reserve could soon start to ease up on its own bond-buying plans in an effort to refrain from further flooding our own economy with additional inflationary stimulus.

However, we think such concerns are premature, as we continue to feel that the lead bank will remain fully supportive for some time yet given the fragile nature of our expansion and the even less-welcoming backdrop abroad.

Meanwhile, the U.S. markets are getting a further lift from the housing market where this morning we have seen the report of a 10.9% increase in U.S. home prices in March. That was the biggest one-month gain since 2006, when the housing market was in its own historic bull market before subsequently collapsing.   - Harvey S. Katz 

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 – Drugmaker Valeant Pharmaceuticals (VRX) agreed to acquire eye care specialist Bausch & Lomb for $8.7 billion, and received a Complete Response Letter from the FDA regarding a New Drug Application for efinaconazole, a treatment for onychomycosis. Bank of Nova Scotia (BNS.TO), one of Canada’s largest providers of banking and financial services, reported results for the April period that were slightly below the consensus estimate. Publisher R.R. Donnelley & Sons (RRD) has expanded its relationship with Williams-Sonoma (WSM), including printing and mailing services of the home furnisher’s catalogs. Medical device maker Boston Scientific (BSX) received CE Mark approval for its GUIDE DBS System, the world’s first deep brain stimulation visualization system.   - Sharif Abdou

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 - Wall Street put in a ho-hum, back-and-forth, and ultimately uneven session to end the latest week and ahead of the Memorial Day weekend. In the process, investors snapped a several-week-long winning streak. Worries about upcoming Federal Reserve monetary policies and concerns about the pace of economic growth at home and the overall business outlook overseas have, in more recent days, helped to somewhat take the measure of the bulls.

It is not that the bears have fully wrested the reins. Indeed, that is not true by any stretch of the imagination. To wit, even after some recent modest reversals, the Dow Jones Industrial Average, which went a bit against the prevailing tide on Friday with a gain of almost nine points, is still above 15,300. In the process, that 30-stock index is within about 85 points of its all-time high. Similar stories are being woven on the S&P 500 and the NASDAQ, as well as on the smaller-cap indexes.

As for the Fed, there have been some musings over the past fortnight, or so, that the lead bank may soon opt to take its foot off of the accelerator and reduce the pace and scope of its bond-buying endeavors in an effort to avoid flooding the market with potentially inflationary stimulus. Indeed, some are even speculating that the central bank may act to stem the rate of its bond buying by as early as its late-June FOMC meeting. However, we are rather skeptical that the bank will act that soon given the still uncertain economic outlook at home and the even more worrisome business fundamentals overseas.

Now, we face a new week, and we will be getting some critical issuances in this four-day stretch. To start out with, the Conference Board, the New York-based research group, will be releasing its monthly figures on consumer confidence at 10:00 AM (EDT), with expectations that this metric will have advanced further in the past month. Then, Thursday, the Commerce Department will release its revised first-quarter GDP report. Initially, Commerce had estimated that the nation's aggregate economic output had increased by 2.5% in the initial stanza. Expectations now are that growth may have toned down a trifle in the quarter, coming in at an estimated 2.4%. Also on Thursday, the Labor Department will release weekly and continuing jobless claims for the latest week. Finally, the four days will end with the government's surveys on personal income and consumer spending for April. The week will then conclude with a consumer sentiment report from the University of Michigan and a manufacturing issuance covering the greater Chicago area.

As to the day ahead, stocks are rallying strongly abroad, as investors worldwide are cheering signs of policy support from the central banks in Japan and Europe. These bank comments, which are being issued, it would seem, to reassure investors that even if the U.S. Federal Reserve steps in and slows the pace of monetary expansion over here, that the banks in Japan and across the euro zone will remain fully supportive. As a result, the bourses in Japan and across Europe are all up by about one percent or more, while our futures are pushing ahead strongly, with the S&P 500 futures in the plus column by 14 points and the NASDAQ better by almost 29 points, presaging a notably better opening when Wall Street gets down to business in less than 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.