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After The Close - Stocks finished nicely higher after recovering from a mid- to late afternoon selloff today, but ended off of their highs for the session. The week began with optimism that the Federal Reserve would maintain its aggressive securities-purchasing program. After being up more than 190 points, the Dow Jones Industrial Average ended 110 points higher and the NASDAQ, which had been up 45 points, finished a less impressive, but still very solid, 29 points to the good.

Apparently, a report that the Federal Reserve was ready to begin reducing the scale of its bond buying jarred investors. Nevertheless, stocks benefited from some upbeat business news, and market breadth was strong, with about two stocks advancing for every one declining on the New York Stock Exchange.

At the sector level, shares of energy-related companies enjoyed improved sentiment, particularly the stocks of oilfield services providers. This group has lagged the broader market of late, as the rig count has dropped. But the feeling that oil prices may remain high, given political turmoil around the globe, seemed to provide a lift. Shares of Core Laboratories (CLB) jumped as a result.  

Technology stocks enjoyed good relative strength, as well, including the shares of Cisco Systems (CSCO - Free Cisco Stock Report), the Dow’s leading percentage gainer today.

Tomorrow brings economic data in the form of the Consumer Price Index for May, where a 0.2% rise is expected in both the headline number and the so-called core rate, which excludes food and energy. The CPI is the companion report to last week’s Producer Price Index, which showed a rise in inflation at the wholesale level prior to stripping out the volatile food and energy items. "Core" PPI inflation was more contained, though. Tomorrow’s CPI will likely need to indicate inflation is not a threat for the Federal Reserve to continue to have the leeway to administer aggressive monetary stimulus. 

Also on tap for Tuesday are reports on housing starts and building permits for May. Those readings are projected to show that the housing sector recovery remains on track.
Meanwhile, earnings are due out from Adobe Systems (ADBE) and Darden Restaurants (DRI).

But all of this may only be a warm up for what is viewed as the main act this week, when the Federal Reserve’s two-day policy meets ends on Wednesday and its Chairman, Ben Bernanke, holds a press conference providing more color on the central bank’s views.   - Robert Mitkowski

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

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12:35 PM EDT -  The major U.S. stock indexes all opened to the upside at the start of the new trading week and quickly moved higher as the morning progressed. At the noon hour in New York, the Dow Jones Industrial Average, S&P 500, and NASDAQ composite were all sporting gains of right around the one percent mark.

Economic news has been scant, but favorable, this morning. The New York Federal Reserve reported that the Empire State index on manufacturing improved in June to 7.8, versus a reading of negative 1.4 the month before. This was well above the consensus estimate of a relatively flat reading, and marked the highest level since March of this year.

A broader reaching development came from the National Association of Home Builders housing market index, which rose to 52 in June, versus 44 in May. Readings above 50 indicate that builders are feeling positive about business trends, and the latest sentiment index was the highest since 2006; about a year after the housing market’s peak. Tomorrow we get the government’s report on new home starts for May. The consensus there is that the number will come in at a seasonally adjusted annual rate of 940,000 homes, up from the 853,000 reported for April.

More likely, however, traders will be keeping a close ear the ground for any rumblings from the Federal Reserve’s two-day Federal Open Market Committee meeting which starts tuesday. Fed Chairman Benjamin Bernanke is scheduled to meet the press with an official statement on Wednesday afternoon. Our sense is that, with core inflation remaining relatively benign, the Fed will continue its bond-buying program for the time being, and this morning’s market action appears to reflect the same sentiment. Indeed, U.S. equities appear to be echoing the solid gains posted overseas. At Noon New York time, the major European bourses were led by a 1.6% advance in France’s CAC 40, while Germany’s DAX was not far behind with a gain of 1.10%. Meanwhile, London’s FTSE 100, though the laggard of the bunch, was up a respectable .4%. - Mario Ferro

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 A number of companies made moves over the weekend that will likely result in active trading of their shares today. Subscription-based media content provider Netflix (NFLX) has inked a large original content deal with movie studio DreamWorks Animation (DWA) that will give Netflix access to much of DreamWorks’ content. Both stocks are up nicely in the premarket as a result. Shares of Weyerhaeuser (WY) are also indicating a higher opening this morning, after the forest products company announced plans to hold a stock offering in order to finance a purchase of Longview Timber. Additionally, the company is exploring a sale or spinoff of its homebuilding business, Weyerhaeuser Real Estate. – 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 - Wall Street is coming off a losing and quite volatile five-day stretch for equities. For the week, the Dow Jones Industrial Average, the NASDAQ Composite, the broader S&P 500 Index, and the small-cap Russell 2000 were down 1.2%, 1.3%, 1.0%, and 0.6%, respectively, with fears that the world central banks were going to ease off on their current accommodative monetary policies prompting the selloff. It marked the third losing five-day stretch for stocks in the last four weeks.

Once again, the economy is expected to be front and center in the week ahead, with several key reports due out over the next five trading days. At 10:00 A.M. (EDT), the National Association of Home Builders kicks off the heavy week of housing news with its Housing Market Index for June. Then tomorrow, we will get the data on housing starts and building permits for the month of May, followed by the latest data on existing home sales on Thursday. The week will also bring data on consumer prices (Tuesday), initial weekly jobless claims (Thursday), and the Leading Indicators (Wednesday).

However, the biggest news on the U.S. economy will come on Wednesday afternoon, when the Federal Reserve will issue a statement following the conclusion of its two-day Federal Open Market Committee meeting. The report is expected to be scrutinized by investors who are anxiously waiting to hear if the lead bank is going to continue its aggressive bond-buying program. If the Fed were to put the brakes on its stimulus measures or even hint that a drawdown in bond buying is forthcoming, it could prompt a selloff in an equity market that has moved higher this year on the Federal Reserve’s supportive measures. Year to date, the Dow 30, the NASDAQ Composite, and the S&P 500 Index are up 15.0%, 13.4%, and 14.1%, respectively, even with the recent modest selling on the aforementioned Federal Reserve concerns. Our sense is that the Federal Reserve will announce that it is staying the course with regard to monetary policies at least for the near term. A benign reading on “core” producer (wholesale) prices last Friday does not put any additional pressure on the lead bank to pullback on its easy monetary policies. 

With less than an hour to go before the commencement of trading on these shores, the equity futures are pointing to a markedly higher opening for the U.S. equity market. Thus far today, the news from overseas has been uplifting. The major Asian equity indexes, led by Japan’s Nikkei 225, finished considerably higher overnight and the major European bourses are up sharply as trading progresses on the Continent. Germany’s DAX and France’s CAC-40 indexes are sporting gains of more than 1.0% so far today.

Even with what is looking to be a nice start to the trading week, we expect the market to remain quite volatile over the next few days, especially with the Federal Reserve’s upcoming agenda on the minds of inventors. Market volatility, as measured by the S&P 500 Volatility Index (or VIX) has picked up considerably in recent weeks, with the average daily range in the Dow Industrials Average just slightly short of 200 points since Fed Chairman Bernanke's testimony before Congress on May 22nd. At that time, Mr. Bernanke rattled the equity and bond markets a bit when he said that the Fed could reduce the pace of quantitative easing in the "next few meetings." This Wednesday should bring more clarity on this subject. Stay tuned. – William G. Ferguson

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