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After The Close - The U.S. equity market was under heavy selling pressure at the start today, with continued worries about the Federal Reserve winding down its ultra-aggressive monetary policies later this year and concerns about a credit tightening and slowing economy in China the primary culprits. However, after the sharp selloff, the major equities indexes were able to stabilize by the early afternoon and then went on to pare a portion of the earlier losses, before the sellers returned in the final 30 minutes of the session. When all was said and done, the Dow Jones Industrials, which at one point was looking at an intraday loss of 248 points, finished 140 points lower. The NASDAQ and S&P 500 Index closed with respective losses of 36 and 19 points. Declining issues far outnumbered advancers on both the Big Board and the NASDAQ, to the tune of about four-to-one on the former.     

From a sector perspective, most of the 10 major groups finished in the red. The biggest laggards were the basic materials stocks, which were under pressure from the get-go on concerns that slowing growth in China could reduce demand. Construction materials, steel, aluminum, and precious metals were down notably today. Conversely, there was less hectic selling  in the consumer discretionary, telecom, and utilities issues. Unnerved investors may have found some comfort in these more defensive sectors. The pullback in bond yields as the session wore on also may have spiked some interest in these higher-yielding equities.   

Meanwhile, there was some more news on the Federal Reserve, which has been on hot-button topic for investors for more than a month now. Specifically, Minneapolis Fed President Narayana Kocherlakota, who is considered a dovish Fed official, remarked that the lead bank needs to communicate policy better. Mr. Kocherlakota’s statement comes on the heels of the dissenting remarks last week from St. Louis Fed President Bullard.  The apparent in-fighting among central bank officials has unnerved investors who are worried that the Fed might not have the solid grip it professes to have on managing monetary policy. With the lack of any major economic and earnings news the last two trading days, these stories have garnered much more attention than they normally would from the investment community.

Speaking of the economy, the data will begin flowing in tomorrow, with reports due on durable goods orders, new home sales, and consumer confidence. These reports, especially the latter on the health of the consumer, may be even more scrutinized than normal as they will provide more clues as to how the economy is doing. Last week, the Federal Reserve in its latest FOMC statement said that the direction the Federal Reserve takes with regard to its bond-buying program will depend upon the state of the economy, especially the labor market.

Our sense is that stock-market volatility is likely to remain elevated for at least a few more weeks until second-quarter earnings season commences on July 8th with a report from Dow-30 component Alcoa (AA - Free Alcoa Stock Report). The upcoming economic news, though important, is not likely to divert the attention of investors away from the topic of the Federal Reserve because, as noted, the lead bank’s forthcoming policies will probably be dictated by the strength of the U.S. economy and labor market.  -  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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12:35 PM EDT - The stock market is putting in another dismal session today, extending last week’s sharp selloff.  As we pass the noon hour in New York, the Dow Jones Industrial Average is off 237 points (-1.6%); the broader S&P 500 Index is lower by 32 points (-2.0%); and the NASDAQ is shedding 60 points (-1.8%). Market breadth is decidedly negative, with declining stocks greatly outnumbering advancers on the NYSE.

All of the market sectors are trading lower, with especially steep losses in the basic materials issues. Specifically, the metals and mining stocks are off sharply. Also, the coal stocks are down again, as this sector has fallen notably out of favor. The energy stocks are also down, with weakness in exploration and production companies. While there really is no relative strength worth noting today, some healthcare issues are holding up a bit better that the broader market. Unfortunately, traders are no longer fleeing to the usual safe havens and that is compounding the damage. For instance, in the past when equities sold off investors might flock to gold. But, that has not been the case lately. Also, U.S. Treasuries are currently not getting too much respect, as investors may be waiting for higher rates to kick in.

Technically, the S&P 500 Index sold off materially last week, accompanied by a sharp rise in trading volumes. The bulls made some attempt to stabilize the situation on Friday, but that move is being undermined by the selling we are seeing today. The Index is now well below its 50-day moving average located at about 1,618 and that may be worrisome to some technicians and traders. It seems fear has returned to Wall Street, as the VIX is spiking 11% today, to 21. It was not too long ago that this Index had been near 12, and very few traders were feeling bearish. If the market moves lower from here, the S&P 500 Index may test its 200-day moving average at about 1,500, which would imply a roughly 11% pullback from the 52-week high of 1,687. It should be noted that this type of correction, while not enjoyable for traders, is not unusual in bull markets, and does not necessarily mean the party is over.

There was no economic news released this morning, and that may have investors looking overseas. For instance, the markets in Asia closed sharply lower overnight, and that did little to help our markets recover ground. -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 EDTThe bears are at it again. Indeed, following one of the worst weeks for those long equities in some time, those perennial pessimists are taking stocks down again, and sharply, as we start a new week.

Specifically, after just over a half hour of trading this morning, the Dow Jones Industrial Average is off some 215 points; the NASDAQ is down by 51 points; and the Standard and Poor's 500 Index is in the red to the tune of 25 points. Losing issues are swamping winners, meantime, to the tune of ten-to-one on the Big Board and by some seven to one on the NASDAQ.

Two things are rattling investors so far this morning. First, there is the carryover from the Federal Reserve's looming shift to a slightly less accommodative monetary stance following last week's FOMC meeting. It is not that the bank is shifting gears all at once. It is just that it is suggesting that the pace of bond buying, the methodology by which the Fed is attempting to lower long-term interest rates, may well start to slow by yearend and conclude by mid-2014.

Then, there is China, which yesterday said that the nation's commercial banks would be on their own in securing cash, suggesting that some kind of monetary squeeze might be at hand. The sharp downtrend on Wall Street thus far today follows widespread declines overseas overnight and this morning.  – 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 SurveyCorporate news is quite light this morning, though there was some M&A activity over the weekend. Indeed, shares of Tenet Healthcare (THC) are up nicely ahead of the bell, despite a decidedly weak premarket, after the operator of acute care hospitals and specialty care facilities struck a deal to acquire industry peer Vanguard Health Systems for about $4.3 billion. – 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 - The Federal Reserve acted, and the stock market swooned. That, in a nutshell told the story on Wall Street last week. Worse, the high level of volatility does not seem as though it is about to end anytime soon, at least judging by the performance of the major bourses this morning and overnight.

To wit, in China, the Shanghai Composite was off by more than 5% on fears that this fast-growing nation will pinch credit too tightly, and thus possibly slow its economy more than it is hoping for. At the same time, stocks in Hong Kong and Japan were off notably overnight, while the key bourses in London, Paris, and Frankfurt are down about 1% each so far today. And on our shores, the Standard and Poor's 500 Index futures are down some 12 points, while the NASDAQ futures are lower by more than 14 points, presaging a sharply lower opening for Wall Street when trading commences in about a half hour from now, after a Friday session that saw the least volatile day in the past two weeks for the stock market.

It is not that the Fed did or said all that much last Wednesday afternoon. All the lead bank suggested was that it would likely start to taper down its aggressive bond buying efforts by yearend, and possibly move to end the program by the middle of 2014, unless things changed notably on the economic front. In suggesting such an modest shift, the bank acknowledged that things were better on the economic side, but that our nation was not yet on fully secure ground.

Still, those benign musings were all that Wall Street needed to hear, and the selling commenced, taking the Dow down by more than 550 points in just two days. Also tumbling was the bond market, and that major setback continues this morning, with the yield on the benchmark 10-year Treasury note climbing to 2.61%. Now, this is not a very high yield on a historical basis, but it is nearly twice the 1.39% historically low return in place earlier this year. At the same time, the 30-year Treasury bond is now yielding 3.60%. That, too, is up sharply from the annual low of 2.45%.

Thus, this is life after the best of the Fed's monetary support seems to be passing from the scene. To be sure, the bank is not yet on a course to raise borrowing costs, and yields are still near their nadir. As such, the central bank is not yet ready to take away the life raft for the nation, nor does it seem in any mood to do so anytime soon. In fact, we still think it may be a couple of years before any serious tightening gets under way--if then.

Still, following such a long period of aggressive easing, with the current $85 billion-a-month in bond buying effort the centerpiece of this ambitious program, even such modest suggestions are being met with a harsh response.

As for the economy, the week ahead will be a fairly busy one for news, with tomorrow seeing the issuance of data on sales of new homes, the monthly report from the Conference Board on Consumer Confidence, and the Commerce Department's data on durable goods orders. Wednesday then will bring the final revision of first-quarter GDP, while Thursday will see reports on personal income, consumer spending, and initial and continuing jobless claims.

Thus, it should be a fairly busy week after what shapes up as a markedly weaker opening on Wall Street this morning, as the bulls seek to re-establish some stability in what is now a very volatile situation. – Harvey S. Katz

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