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After The Close - Stocks bounced back strongly today from their first three-session losing streak of the year, helped by firm data on the economy. Aided by a late-day surge, the Dow Jones Industrial Average ended 181 points higher and the NASDAQ was 45 points to the good. The rally was broad-based, with advancers outpacing decliners by more than five to one on the Big Board.

Truth be told, this week’s Monday to Wednesday selloff was not entirely unexpected, given the market’s major move up since November. Whatever the reason, be it volatility in Japan, slowing growth in China, or concerns about Federal Reserve policy, stocks were due for a pullback at some point.
What is less clear is if the choppy action that has become more prevalent in stock prices of late will continue for a while, or if today’s big advance marks the start of another rally. It may turn out to be that the market needs further time to consolidate the impressive gains made over the past six months. Earnings season is still a month away, economic growth continues to be only moderate, and central bank policy appears set to become less accommodative in the not-too-distant future. So, while the bulls usually win out in the long run, the bears may yet come out on top in a few battles in the meantime.

At the sector level, shares of basic materials companies led the way, despite a reduced outlook by the World Bank for global economic growth in 2013. The influential organization cited slower growth in the up-and-coming nations of Brazil, China, and India, and well as Europe’s deep problems, for its revision. However, the Bank lifted its view of prospects for the United States and Japan. That may have provided a boost to economically sensitive stocks, such as steelmakers U.S. Steel (X) and Cliffs Natural Resources (CLF).

In corporate news, Gannett’s (GCI) cash offer to buy Belo (BLC) topped the headlines. The move would create the nation’s fourth largest owner of major TV network affiliates and a powerhouse that would reach a large segment of U.S. households. Word of the proposed buyout lifted the shares of other media companies.    

Tomorrow brings fresh economic data in the form of the Producer Price Index for May, plus reports on Capacity Utilization and Industrial Production for May, all prior to the opening bell. The tone of morning’s business news may well help to determine the market’s course early on. -Robert Mitkowski

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

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12:20 PM EDT - The stock market opened lower this morning, but is now in positive territory. This showing is commendable as it comes amidst severe selling overseas. Specifically in Asia, Japan’s Nikkei plunged almost 6.5% overnight, pushing that Index down over 20% from its recent high and technically into bear market territory. Concerns that the Bank of Japan may not be deploying full stimulus measures were likely behind the move lower. Notably, the situation in Japan has triggered fears of a similar nature on our shores lately. At just past noon in New York, the Dow Jones Industrial Average is up 53 points (0.4%); the broader S&P 500 Index is ahead seven points (0.4%); and the NASDAQ is adding on 14 points (0.4%). Market breadth suggests a positive bias to the market, as advancing stocks are ahead of decliners by a modest margin on the NYSE. All of the market sectors are trading higher, with gains in the basic materials and financial issues. Meanwhile, the utility stocks were weak initially, but have since firmed up.

Technically, the market has been weak, logging three consecutive down days. Today, the S&P 500 Index tested its 50-day moving average located at about 1,611 and found some support there. Hopefully, for the bulls, this level will hold, as it has in prior corrections this year. The VIX is down about 5%, to 17.66 today, suggesting that traders are feeling a bit less apprehensive.

The economic news released this morning was generally constructive. Initial jobless claims for the week ended June 8th declined to 334,000 coming in better than expected. Retail sales for the month of May also showed greater improvement. We additionally received a favorable report on business inventories for the month of April.  It should be noted that while traders are probably overly concerned about a reversal in the Fed’s monetary policy, the suggestion that the economy is improving should still be a plus for the stock market. While a pullback in equity prices may be warranted based on current price-to-earnings multiples and fears about higher interest rates, a bear market should not be in the making, if the economy is truly expanding and corporate profits are increasing. These issues should become a bit clearer next week when the Fed concludes its FOMC meeting and issues a policy statement. Also, as the second quarter nears its close, traders should get some renewed earnings guidance, which, if favorable, could be encouraging.  - 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 It has been a busy week for M&A news, a trend that continues today. Indeed, Gannett (GCI), the largest U.S. newspaper publisher and an owner of network-affiliated television stations, has agreed to purchase Belo Corp. (BLC), a television broadcasting company, for $13.75 a share. If finalized, the deal would make Gannett the fourth-largest owner of major network affiliates in the United States. Both stocks are surging in the premarket as a result. Shares of Safeway (SWY) are also soaring ahead of the bell, after the grocery store operator struck a deal to sell its Canadian business to industry peer Empire Co. for C$5.8 billion. Safeway will likely use the proceeds to pay down debt and repurchase stock.

In earnings news, shares of PVH Corp. (PVH) are indicating a nicely higher opening this morning, after the apparel company reported April-period results that pleased investors. April-quarter financials from clothing and accessories retailer The Men’s Wearhouse (MW) also garnered a warm reception, and that stock is up modestly ahead of the bell. On the other hand, shares of tax preparer H&R Block (HRB) are down slightly in the premarket on earnings news. – 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 - It is all about the Federal Reserve these days--at least on Wall Street. Underscoring this view is the fact that the past several weeks have seen instances of elevated volatility come into view, in large measure, it seems, whenever there is a change in the consensus as to what, if anything, the central bank is planning to do, and when it will do it.

Early this month, there was the thought that the Fed would soon slow the pace of asset purchases, or bond buying, the stimulus effort in which the lead bank seeks to lower long-term interest rates as a way of further underpinning the uneven and often halting business expansion. Such a view was coming into focus even though the economy was showing signs of slowing down in the current quarter.

Then, last Friday, after the Labor Department's release of benign employment data, featuring a steady, but clearly not compelling, rise in non-farm payrolls in May, the chances for a slowing in the stimulus effort seemed to fade somewhat and the bullish forces were able to regroup and send the market sharply higher. Unfortunately, that sudden euphoria lasted for just a day, and by Tuesday of this week--following a flat market to open the five-day stretch--the bears were back in business. Those perennial pessimists were back at it again yesterday, throwing cold water on every attempt to halt the flow of red arrows. Thus, after a brief flurry of early buy orders, the sell tickets were back in force, and save for a few interruptions along the way, the selling persisted into the close.

As the final bell sounded, the major averages were all in the red, with the Dow posting its second successive triple-digit point loss, falling 127 points, in the process. Material setbacks also were suffered by the Standard and Poor's 500 Index (off 14 points), the NASDAQ (down 37 points),  the S&P Mid-Cap 400 (lower by 11 points), and the small-cap Russell 2000 Composite (down by nine points). Overall, the losses were about in line with those suffered on Tuesday. In the process, the aforementioned gains of last Friday now have been erased in almost all cases.

Making matters worse is the fact that the first three days of this week have brought no economic reports of note, which might have been able to take the traders' minds off of the Fed, if only for a while. There is the obvious concern that the bank will at some point slow down the pace of asset buying. That everyone knows. What is not so apparent is just when that slowdown will get under way. 

Meanwhile, as stocks fall, bond returns rise, with the yield on the benchmark 10-year Treasury note now up to 2.23%. That is almost 85 basis points above the low reached several months back. The yield on the companion 30-year bond, once as low as 2.45% in the past year, has risen to a modest 3.38%. Now, such returns are not yet a big challenge to equities, as many high-quality equity issues yield at least as much as the 30-year Treasury bond, with the added allure of potential strong capital gains. But, such fixed-income returns are at least starting to be worthy of some passing interest.

Now, a new day is upon us, and the bears are again flexing their muscles in the overseas markets, taking stocks notably lower both in Asia and Europe, especially in the former, where the Nikkei was off more than 6% overnight and in China and Hong Kong, where declines of better than 2% were suffered. The sharp retreat in Japan follows a drop in the Nikkei of more than 5% yesterday. Meantime, on our shores, the equity futures are signaling a further early retreat, with the NASDAQ futures off about a dozen points. As we saw yesterday, and on Tuesday, as well, the early indicators are not necessarily harbingers of things to come. So, the bulls could have hopes for a reversal over the course of the day, should bargain hunting again come into vogue. – Harvey S. Katz

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