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After the Close - A volatile truncated trading week on Wall Street—one that saw some pronounced intraday swings in the direction of trading—ended with a big statement by the bears. The major U.S. equity indexes traded in a narrow band around the neutral line for much of today’s session before selling intensified in the final few hours and pushed them lower by the close. At the final bell, the Dow Jones Industrial Average, the NASDAQ, and the broader S&P 500 Index were down 209, 35, and 24 points, respectively. Overall, declining issues held an edge over advancers on both the Big Board and the NASDAQ, which was the case from the start of the trading day and may have been a sign that a late-day selloff was quite possible today. For the four-day stretch—the market was closed on Monday in observance of Memorial Day—the Dow 30, the NASDAQ, and the S&P 500 were modestly lower. It also marked the second straight losing week for equities after a series of weekly gains. Nevertheless, even with the latest hiccups, the saying “sell in May’’ did not apply to the last 31 days, as the aforementioned indexes advanced 1.9%, 3.8%, and 2.0%, respectively.

From a sector perspective, all of the major groups were in negative territory in the latest session. The biggest laggards were the consumer staples and the energy sectors. The basic materials issues were also notably weaker. There was some mild demand for the consumer discretionary and industrial stocks early in the session, but that dissipated by the closing bell. Our sense is that those two areas initially benefited from the release of strong data on consumer sentiment and the Chicago PMI this morning. Within the consumer cyclical spaces, shares of Krispy Kreme Doughnuts (KKD) and Guess? (GES) fared well after both retailing companies reported strong quarterly earnings. That said, the earnings news had minimal impact on the direction of trading this week and that will probably be the case as June begins, as the releases will be light, with the exception of reports from J.M. Smucker (SJM), Dollar General (DG), rue21 (RUE), and VeriFone Systems (PAY).

The same can’t be said for the economy, as we received several reports today, including data on personal income and spending. The Commerce Department reported that personal income showed no increase in April, while personal consumption expenditures contracted by 0.2%. Those figures showed some deterioration from March and no doubt reflected the imposition of higher taxes and the move by some companies to pay their first-quarter dividends late last year, so that holders would pay lower taxes on such disbursements. The income and spending data were somewhat offset by positive reports on consumer sentiment and manufacturing. Specifically, The Thompson Reuters/University of Michigan reading on U.S. consumer sentiment rose to 84.5 in May, its highest level in six years, while the May Chicago PMI survey surged to 58.7 from 49.0 last month—economists were expecting a much smaller increase to 50.0. Looking ahead to next week, we will receive reports on manufacturing activity (Monday), the trade gap (Tuesday), nonmanufacturing (Wednesday), and employment (Friday). The Federal Reserve’s Beige Book summation of economic conditions is also due out next Wednesday and the European Central Bank (ECB) will hold its monetary policy meetings next week.

Speaking of Europe, the major bourses on the Continent finished decidedly lower today, with London’s FTSE-100 and Paris’ CAC-40 both off more than 1.0%. Pressuring European shares, which fell to a one-month closing low, was likely profit taking at the end of a 12th consecutive month of gains and worries that strong U.S. economic data may prompt a cut in stimulus measures. Such sentiment has weighed on European U.S. equities in recent days, a scenario that may well continue next week with the aforementioned ECB monetary policy meeting taking place and another release from the Federal Reserve on tap.  - 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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12:00 PM EDT - The stock market opened lower this morning, but has since recovered, and at just past noon in New York, most of the major averages are in positive territory. There is some strength in the Dow Jones Industrial Average, which is up 21 points (0.1%); the broader S&P 500 Index is off slightly; and NASDAQ is ahead three points (0.1%). For now, market breadth is still negative, as declining stocks are leading gainers on the NYSE. However, these figures may improve as the market strengthens.

The utility stocks are leading the market today, which is good to see. It is important to note that these issues were badly battered over the past few weeks, creating a divergence among the major averages that may have some traders worried. Elsewhere, there is strength in the telecom names, and in the industrials. In contrast, select consumer and financial stocks are lagging.  It should be noted that there has been a considerable amount of sector rotation taking place over the past few weeks. For instance the technology shares lagged the S&P 500 badly over the past year, but have been picking up nicely lately. Also, traders have been betting on biotechnology names, and the fact that they are willing to commit to speculative and growth areas within the market may indicate that the sentiment is still bullish. In contrast, when traders are feeling troubled, they tend to favor the safer high-yielding names.

Technically, the S&P 500 Index seems to be carving out a sideways trading range near the 1,650 area. Volumes have not been overwhelming lately, and it may be that many are taking a wait-and-see attitude, as the market takes a pause. It is important to remember that stocks have delivered large gains for many months now with little let up.

The economic reports released this morning have been encouraging overall. Weak personal spending and income for the month of April indicate that there are no inflationary pressures in place. The Chicago PMI, meantime, jumped to 58.7 in May, well ahead of the April figure and better than anticipated. Also the University of Michigan’s Consumer Sentiment survey provided a final reading of 84.5 for May, which was a bit better than had been expected.

On the earnings front, there were positive releases from donut maker Krispy Kreme (KKD) and designer jeans company Guess (GES). Both of those issues are trading 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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Stocks to Watch from The Survey– Computer giant Dell Inc. (DELL) is in the news this morning, as a special committee has made a recommendation to shareholders for the approval of CEO Michael Dell’s buyout offer, which values the company’s stock at $13.65 per share. Meanwhile, earnings news remains light, as most companies have already reported results for their most recent quarters. A few reports are trickling in though, notably from doughnut chain Krispy Kreme (KKD) and movie studio Lions Gate Entertain. (LGF). Both companies saw their shares rise in the premarket on solid quarterly results. – Kathryn M. Drew

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 - The merry month of May concludes on Wall Street today and, for a change, it truly has been a merry month for those long equities. Indeed, with just one session remaining, the three major indexes, the Dow Jones Industrial Average, the NASDAQ, and the Standard and Poor's 500 Composite all hold gains for the 31 days. To wit, unless there is a dramatic selloff today, those same indexes will have risen every month so far this year, and we need to go back about two decades to see a similar pattern emerge.

This generally strong month, meanwhile, received an added boost yesterday, when the leading averages all posted gains. However, the market ended on something of a sobering note, as a strong rally throughout most of the penultimate session of the month faded notably into the close, with a one-time gain of nearly 100 points in the Dow shrinking to just 22 points by the session's end. The NASDAQ, meantime, ended the day up by a more solid 24 points on some lingering strength in the tech sector.

Propelling the stock market higher yesterday, ironically, were a pair of downbeat economic issuances. Specifically, at 8:30 AM (EDT) the U.S. Commerce Department weighed in with revised first-quarter GDP figures that showed a slightly lesser rate of opening-period business improvement than had been suggested a month earlier. In all, this revision noted that estimated growth came in at 2.4% during the initial stanza, a tenth of a percentage point below the first, or advance, GDP reading. Also, at that hour, the U.S. Labor Department reported that more Americans had filed for unemployment insurance in the latest week than had been forecast or that had filed during the previous seven-day stretch.

Why would weaker-than-expected data embolden the bulls? Simply, the current fear on Wall Street, at least in between earnings reporting seasons, seems to be that the Federal Reserve might opt to soon slow down the pace of monetary stimulus should the economy send off signals that growth was accelerating. And it has been that bond buying, which has contributed heavily to the long-running rally on Wall Street.

However, amid this generally strong five-month-long stock market run are some notes of concern, namely a sudden sharp pullback in Japan's stock market, a further set of economic reversals in Europe, and now a sudden and rather sharp retreat in the bond market on our shores. Fears that the Fed might soon take its foot off the gas pedal have caused bond yields to rise suddenly, with the benchmark 10-year Treasury note, for example, jumping to a yield of nearly 2.15% at one point yesterday. Now, clearly this is not a high rate by any stretch of the imagination. But it is a notable jump from the 1.60% reading in place just a month ago.

However, things seem to again be reversing themselves once more this morning, as Europe's shares are selling off to the tune of some 1% on the major bourses, while our futures, in response, are all lower, with the S&P 500 Index futures now off about eight points and the NASDAQ futures lower by some 13 points. Such action, albeit a bit less bearish than an hour or so ago, in part because just-issued data on personal income and consumer spending for April were weak, still presage a markedly lower opening when Wall Street gets down to business in less than an 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.