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After The Close - The first trading day of the month of June proved to be another volatile one for equity traders. The S&P 500 Volatility Index, which is a measure of market perceived volatility, continued to climb. Such movement higher was been more the norm than the exception over the last fortnight.

The volatility made for a rollercoaster ride for investors. The market initially traded higher, with some bargain hunters out after Friday’s sharp selloff, which included a more-than 200-point drop in the Dow Jones Industrial Average. However, trading quickly reversed course after the issuance of some less-than-encouraging data on the U.S. economy (more below). The major U.S. equity indexes, save for the Dow Jones Industrial Average, proceeded to trade lower until the sellers gave way to a renewed spate of buying in the final hour of the session.

The Dow 30 finished nicely higher. While the strength of the index of 30 bellwether companies looked to be more the exception rather than the rule for much of the session, things did come more into line by the closing bell, helped by the aforementioned late-day buying. At the close, the broader S&P 500 Index and the small-cap Russell 2000, both of which were looking at losses for most of the day, managed to eke out modest gains. The NASDAQ also was able to overcome weakness in the technology sector, which was hurt by declines in the stocks of industry heavyweights Google (GOOG) and Amazon.com (AMZN). Overall, today’s session could be termed mixed, as advancing issues outnumbered decliners on the NASDAQ, while the reverse held true on the Big Board.

Taking a closer look at the sectors, the more-defensive-oriented utilities, healthcare, and consumer staples groups showed leadership. The healthcare sector got a boost from the stocks of Merck & Co. (MRK - Free Merck Stock Report) and Bristol-Myers Squibb (BMY). Shares of the drug developers jumped after both companies announced encouraging results on experimental cancer medicines this weekend. Merck stock also played a big role in the Dow 30’s outperformance relative to the other major U.S. equity indexes. Conversely, some of the cyclical sectors were weaker today, likely owing to a less-than-flattering report on U.S. manufacturing activity.

The headline economic report today came from the Institute for Supply Management. At 10:00 A.M. (EDT), the Tempe, Arizona-based trade group reported that its Manufacturing Activity Index fell to 49.0 in May from 50.7 in April. It marked the first contraction in the ISM Index since November 2012 and the lowest reading since June 2009. The worse-than-expected reading—the consensus expected the index to increase modestly to 51.0—was likely behind the early weakness in the cyclical stocks, but even those areas were able to recover by the final bell. Meantime, construction spending increased 0.4% in April after declining by an upwardly revised 0.8% March—the consensus was for an increase of 1.1%. A dip in residential construction last month weighed on the performance of homebuilding stocks in the latest session. However, not all the news was bad on the economic front today, as we learned this afternoon that US auto sales rose sharply in May after a slight dip in April, with a pickup trucks lead the way. The stocks of the U.S. automakers, including Ford (F) and General Motors (GM), got a nice boost from the report, while the shares of the foreign car manufacturers, such as Toyota Motor (TM) and Nissan Motor (NSANY), were weaker.

Elsewhere, it was a good day for the commodities markets. The weakness of the U.S. dollar versus a basket of foreign currencies had a lot to do with the jump in commodities. The two most closely followed commodities, oil and gold, were nicely higher. Meantime, all of the agricultural commodities, save for corn, were in demand today and the contracts for cotton and cocoa were sharply higher in the soft category.   - William 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 putting in a generally lower session today. At just past noon in New York, the Dow Jones Industrial Average is up 55 points (0.4%); but, the broader S&P 500 Index is off three points (-0.2%); and NASDAQ is quite weak, shedding 28 points (-0.8%). Market breadth is negative with declining stocks outpacing advancers on the NYSE. As was the case on Friday, when the market sold off in the afternoon, this may suggest that there is not enough support for a broader rally today. Notably, we have seen some choppy trading lately (some averages have been advancing while others have struggled) and this has led to a somewhat disjointed market picture. Moreover, there has also been a lack of clear sector leadership, as traders have been rotating in and out of various areas of the market. The utility stocks, which were out of favor for the past few weeks, are advancing nicely today. There is strength in the basic materials names, possibly on higher commodity prices. Also, the energy sector is doing well. In contrast, consumer, financial, and technology names are off sharply.

Technically, the S&P 500 Index has suffered a bit of damage, as Friday afternoon’s selling took the index well below the 1,650 area, which had been providing some support. That move was accompanied by strong volumes, which is worth noting. If the market moves lower from here, a test of the 50-day moving average at about 1,600 may be likely. That would be a roughly 5% correction from the high of about 1,685, and would not be at all unusual in a bull market. The VIX is up 6% to over 17 today, suggesting some apprehension. Notably, the VIX has been gradually creeping up over the past couple of weeks, even as the broader index has been moving sideways, and that divergence may be quite telling.

Traders in the U.S. got little support from the markets overseas, meanwhile. In Europe, the bourses are set to end on weak note. Many countries in the region issued PMI reports that came in a bit better than had been expected. Nonetheless, the figures still indicate an economic contraction is taking place. In Asia, the major markets put in a weak session, highlighted by a 4% loss on Japan’s Nikkei. Notably, the Nikkei has been strong over the past several months, but has been selling off over the past few sessions.

Back on our shores, we received some economic reports worth noting. The ISM for May slipped to 49.0, where analysts had expected a slightly better showing. Also, construction spending increased slightly in April, compared to a decline posted in March. Nonetheless, analysts had been looking for a more vigorous gain. This afternoon we get auto and truck sales for the month of May, and that could provide some insight into consumer sentiment. 

Meanwhile, in corporate news, shares of Cracker Barrel Old Country Store (CBRL) are trading higher on a strong top-and-bottom line showing. Shares of Bristol Myers Squibb (BMY) are also advancing on some favorable drug-related news.  - 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 Earnings news is rather light today ahead of the bell, though restaurant operator Cracker Barrel Old Country Store (CBRL) has reported strong April-period results. The company also increased its quarterly cash dividend and raised its July-quarter forecast. The stock is up nicely in the premarket as a result.

While the earnings front is quiet, there is action in the courtroom, as Bank of America (BACFree Bank of America Stock Report) tries to win approval for an $8.5 billion settlement with mortgage-bond investors, and computer company Apple (AAPL) defends itself against allegations that it conspired with publishers to drive up e-book prices. Both stocks are indicating slightly higher openings this morning. – 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 - World markets are tumbling this morning following a notable retreat on our shores this past Friday. The problem, it seems, is new uncertainty about upcoming U.S. Federal Reserve Board policies in the wake of some less-than-definitive recent policy statements by our nation's lead bank.

To recap, the Fed is spending $85 billion a month on buying long-term bonds in order to further push down interest rates. The goal is to induce more borrowing and spending over here on the part of businesses and individuals. The hope, also, is that such a pickup in business activity will also help to prop up our labor markets. There is some indication, most notably in a materially strengthening U.S. housing market, that such efforts are achieving some of these their objectives. The news is less definitive on the employment front. Now, though, some are suggesting that enough is enough and that the long-range risks to the continuation of such aggressive policies are too high to stay the course.

There is some speculation that the Fed will heed such advice and begin to take its foot off of the accelerator, and perhaps as early as later this month. There is another school of thought which holds that the nation's central bank, and most notably its Chairman Ben S. Bernanke, are not at that point yet. We tend to fall into the latter camp. The Fed Chairman has, in fact, been out front during his tenure in suggesting that his greatest fear is a repeat of the 1930s Depression. Such a posture would seem anathema to stopping such aggressive policies just yet, in our opinion.

Meanwhile, stocks, as noted, are falling in rather pronounced fashion this morning, giving back an outsized 3.7% in Japan overnight and between 1% and 2% in London, Paris, and Berlin.

As to our markets, as noted, they fell rather sharply on Friday, led lower by a 209-point drop in the Dow Jones Industrial Average. Interestingly, but not shockingly, much of that plunge came late in the day, as Friday's between Memorial Day and Labor Day often see exaggerated late buying or selling, as many traders break for the weekend early and leave a vacuum of sorts for many. That may have been what happed late last week. This morning's sharp reversal in Asia and on the Continent is just a response to the late selling over here on Friday afternoon, we sense.

Now, though, a new day and week dawn, and while the overseas markets are pulling back sharply, our equity futures are pressing forward rather nicely in the pre-market, with the Standard and Poor's 500 Index futures and the NASDAQ futures up by five and 10 points, respectively.

Meantime, it shapes up as a busy week for news over here, with the ISM leading off this morning with a report on manufacturing activity for May. A slight improvement is expected in that key metric. Then, we will get data on construction spending and car sales later today. All of this will be followed tomorrow by news on the trade gap for April and Wednesday by the other ISM data point, when that trade group issues its survey on non-manufacturing activity in May. Here, too, some slight pickup is expected. Then, we will get data on factory orders and the Fed's Beige Book. The week will then conclude with the report on employment and unemployment this Friday.

So is should be an eventful five days following what we believe will be a moderately higher opening when traders get 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.