After the Close - The U.S. equity market traded in a tight band around the neutral line for much of today’s choppy session. Our sense is that after four consecutive sessions in which the major U.S. equity indexes pressed forward, traders may be taking a wait-and-see approach ahead of the upcoming heavy dose of earnings reports, beginning with this Friday’s reports from banking giants JPMorgan Chase (JPM Free JPMorgan Stock Report) and Wells Fargo (WFC). Investors appear to be cautiously optimistic that second-quarter earnings results will surpass lowered expectations.

Buying did pick up briefly this afternoon after the minutes from June’s Federal Open Market Committee (FOMC) were made public at 2:00 P.M. (EDT). The release sent mixed signals to the investment community. In the report, the FOMC said that it would like to see a continued steady improvement in job creation before it begins to taper off on its bond-buying measures. Some investors took this as an indication that the stimulus measures may have some extra staying power. On the other hand, the minutes also showed that nearly half of the committee members would like to see the quantitative easing end by the conclusion of this year, as we expect will be the case.

The minutes from the Federal Reserve were probably more closely scrutinized than normal because there was not a lot of news to divert the investment community’s attention. The earnings schedule, which did include a strong quarterly report from Family Dollar Stores (FDO), was light and there was no headline economic data, save for the aforementioned Fed minutes. However, we did learn from the Commerce Department that U.S. wholesale inventories dropped 0.5% in May, while wholesale sales climbed 1.6%. The consensus called for inventories to increase. Today’s report, which also revised down April inventories, may be an indication that second-quarter growth may be a bit more subdued than previous expectations. Wholesalers account for almost one-third of all business inventories in the U.S., with manufacturers and retailers making up the rest. Inventories are a critical part of gross domestic product. Not surprisingly, given this data and the commentary from the Federal Reserve, some of the more economic-sensitive sectors were modestly weaker.

From a sector perspective, the basic materials, energy, industrial, and financial groups were a bit out of favor among traders today. Overall, none of the remaining top-10 sectors stood out in the latest session. The spread between advancing and declining issues was thin on the Big Board, but the gainers held a notable advantage on the NASDAQ. Accordingly, the NASDAQ Composite performed relatively better than the Dow Jones Industrials and the broader S&P 500 Index. 

Meantime, there was some movement in the fixed-income market. Specifically, Treasury yields, which were nominally higher prior to the FOMC release, were up a few more basis points following the release. The rising bond yields did not seem to hurt the higher-yielding utilities, telecom, and consumer staples stocks, which finished modestly higher today. - William G. Ferguson

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


12:00 PM EST - The stock market is putting in a mixed showing today. At just past noon in New York, the Dow Jones Industrial Average is down 29 points (-0.2%); the broader S&P 500 Index is off three points (-0.2%); and the tech-heavy NASDAQ is up three points (0.1%). Market breadth also suggests some weakness, as decliners are slightly ahead of advancers on the NYSE and the NASDAQ. The various sectors also portray a mixed market. There is some leadership in the healthcare area, thanks to the biotechnology stocks, which have been quite strong lately. The telecom sector is also doing well with strength in the mobile area. In contrast, there is weakness in the financial issues, as the banks are having a difficult session. The basic materials stocks are lower, too.

Technically, the S&P 500 Index is pulling back today. After advancing for four consecutive sessions, a breather here is not totally unexpected. Volumes were light yesterday, suggesting some traders may be taking a wait-and-see approach, which is understandable given the numerous earnings announcements that are soon to be released. The VIX is slightly higher today, too, further suggesting that the session may have a somewhat tentative tone.

There were a few economic reports released this morning.  Earlier today, the Commerce Department reported that wholesale inventories slipped 0.5% for the month of May, following a decline in April. Analysts had expected inventories to rise slightly in May, so the report may have caught some off guard. Further, traders may now be taking a tentative stance in front another release due out this afternoon, as the FOMC is slated to release the minutes from its June 19th FOMC meeting, and many will be dissecting this report in an attempt to better understand the Fed’s view of the economy and to be alert to any shifts in current monetary policy. Tomorrow, we get a look at the weekly initial and continuing jobless claims.

It was a light day for corporate releases, even though the second-quarter earnings season unofficially began yesterday with the Alcoa (AA - Free Alcoa Stock Report) release. However, we received some guidance revisions, which is to be expected, as reporting dates draw closer. Specifically, Nu Skin (NUS) stock is up on a better outlook, while shares of Nabors (NBR) are off on lowered guidance.  - Adam Rosner

At the time of this article's writing, the author had a position in Alcoa (AA).


Stocks to Watch from The SurveyThere is more news on the earnings front, and shares of discount retailer Family Dollar Stores (FDO) and toiletries/cosmetics company Helen of Troy (HELE) are both up modestly in the premarket after reporting May-period results. On the other hand, the stock of Fastenal (FAST) is indicating a slightly lower opening this morning, after the seller of industrial and construction supplies delivered mixed June-quarter results. Other companies are updating guidance in advance of second-quarter earnings reports that are due out over the next few weeks. Oilfield services provider Nabors Industries (NBR) trimmed its outlook and its stock is down notably ahead of the bell as a result. Conversely, shares of Nu Skin Enterprises (NUS) are up sharply in pre-market trading, after the seller of personal care and nutritional products announced preliminary second-quarter results that impressed investors. – Matthew E. Spencer 

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


Before The Bell - The bulls pushed forward once more yesterday, driving equities broadly higher in a solid advance that lifted the Dow Jones Industrial Average up to 15,300. That 30-stock composite, which was underpinned in the latest session by optimism on the corporate earnings front, is now within 250 points of its all-time reached earlier this year. The other averages also did well, with equities gaining for a fourth day in succession.

Meanwhile, as the Dow and several other key averages advanced to near new high ground, the NASDAQ, which earlier this century had plummeted on the end of the dot.com bubble and the subsequent historic bear market, managed to gain enough ground to put that tech-heavy composite at a 12-year high. At 3,504, however, the NASDAQ is still more than 1,500 points from its best-ever levels reached in 2000.

As noted, there is optimism around that the pending tide of quarterly earnings releases will be less troublesome than earlier feared. In one release, yesterday, aluminum maker and Dow-30 component, Alcoa (AAFree Alcoa Stock Report) issued results for the second quarter that narrowly beat lowered consensus forecasts, even as aluminum prices continued to retreat. It is not that demand for this metal is so weak; it is just that capacity, which continues to expand mightily, is now far in excess of what is needed. Much of this added capability is coming from China, which is now the largest producer of the metal worldwide--just as it is in steel.

Ironically, while Alcoa's results emboldened the bulls on a market-wide basis, they did little for the beleaguered metals provider, as Alcoa stock, the poorest performer on the Dow thus far this year, essentially marked time, easing by a penny a share to $7.91. That issue is just $0.28 a share off of its 52-week low of $7.63.

The focus on earnings is understandable this week, as not only are results about to be released en masse for the latest quarter, but there is little in the way of economic news to act as a counter weigh. Next week, however, both the business beat and earnings schedule heat up in earnest, with a number of key business releases and 10 Dow companies set to report.

In other news, the Federal Reserve, which is rarely far from the minds of traders, is set to release the minutes from the June 18th-19th FOMC meeting at 2:00 this afternoon (EDT). Expectations are that the central bank will acknowledge that the U.S. economy is pressing forward at a modest pace and that such activity should allow the bank to press ahead with its timetable for easing back on monetary stimulus, as it has advised that is intends to do. Unless there is a marked deviation from this path later today, the market should take this report in stride.

As to the day ahead, the U.S. and European markets are not taking their cue from China, which saw its stocks rise sharply, with traders emboldened, apparently, by indications that nation's central bank may ease monetary policy to spur growth after exports fell for the first time in 17 months. That weak data, meantime, is helping to push the European bourses into negative territory this morning. Our futures likewise are a bit lower, presaging some minor profit taking at the outset of the trading day following the aforementioned quartet of winning sessions in a row. – Harvey S. Katz

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