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After The Close - Stocks fell sharply today on fears of both higher interest rates and reduced Federal Reserve stimulus, along with a disappointing earnings report from retailer Macy’s (M). At the end of the day, the Dow Jones Industrial Average and the NASDAQ were down 113 points and 15 points respectively. Market breadth was weak, with losers topping gainers by about two to one on the New York Stock Exchange. However, strength in Apple (AAPL) shares, which surpassed the $500-a-share mark for the first time since January, before paring its gains near the close, helped to limit the damage on the NASDAQ.

The news on Macy’s seemed to set the tone of trading today. Macy’s had been executing its strategy well and the feeling among investors, and least for today, was that, if they can’t produce impressive results, other retailers may have trouble, too. As a result, retailing stocks, including Nordstrom (JWN) and Target (TGT) were dragged down.

Utility stocks were also weaker than most in today’s session. The yield on the 10-year Treasury note has risen to 2.7%, up more than 1.00% in a few months, and the sentiment in some quarters is that it may surpass 3.0% before too long. Competition from rising bond yields hurt the shares of Duke Energy (DUK) and Dominion Resources (D).

Meantime, concerns that the Federal Reserve may soon reduce its bond-buying program appear to be well-founded. A recent posting on the New York Fed’s website indicated that it was laying the groundwork to prepare for the eventual draining of liquidity in the banking system. The notice pointed out that a change in policy is not a done deal, but investors sense the Fed is moving in that direction.

Elsewhere, the day’s tragic events in Egypt, while disheartening, didn’t push oil prices much higher. Egypt is not a major oil producer, but instability in the nation has periodically given rise to fears that traffic through the Suez Canal, where a large amount of Middle East oil passes through, may be interrupted.  
On the bright side, gold stocks, including mainstays Barrick Gold (ABX) and Newmont Mining (NEM), shined today. Gold prices are enjoying a bounce after the steep tumble they recently suffered.

Tomorrow brings a handful of economic reports that will provide further information on the direction of inflation, manufacturing, and industrial production. Earnings report from a number of retailers may also shed light on whether the disappointing results at Macy’s were a one-off situation, or part of a broader trend.   - Robert Mitkowski

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

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12:20 PM EDT - The U.S. stock market traded lower thus far today. At just past noon in New York, the Dow Jones Industrial Average is off 73 points; the S&P 500 Index is down five points; and the NASDAQ, which is holding up a bit better in comparison, is shedding eight points. Market breadth is mildly negative, as declining stocks are outweighing advancers by a narrow margin on the NYSE. However, it should be noted that these figures are a bit better on the NASDAQ, and hint at a more mixed market performance. For instance, the Russell 2000 is down just two points, and is thus holding up relatively better than the larger averages. 

The market sectors are trading lower, for the most part. There is weakness in the consumer cyclical names, as well as in the utilities. In contrast, some strength can be seen in the basic materials sector. This group, which had been badly battered in recent months seems to be receiving some renewed interest from traders lately. The metals companies are getting particular attention. The financial issues, such as the banks and insurance companies, are also holding up relatively well today.

Technically, the S&P 500 Index continues to trade in a sideways range, as it has for the past several sessions. Nonetheless, so far, the index has managed to hold up relatively well. Notably, we have seen buyers move in to support equities, especially on days when the market heads lower in the morning. While this has not been enough to produce sustained advances, it is still an encouraging sign. Sentiment seems stable, as the VIX is still at very low levels.

Meanwhile, traders received limited economic news this morning. Specifically, the Producer Price Index for July came in with an unchanged reading, indicating that there is little in the way of inflation to worry about. That may suggest to some that the Fed does not have to act too soon to taper its bond buying. Tomorrow will be a busier day for news, as we get reports on consumer prices, weekly initial jobless claims, and industrial production.

In the corporate arena, Deere & Co. (DE) shares are off a bit, even though the earth moving equipment company put decent quarterly results. Investors, though, may have been concerned about recent guidance. Also, shares of Cree (CREE) are trading sharply lower after the technology company issued weaker-than- hoped-for guidance.  - 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 SurveyInvestors are digesting a few more earnings reports today. The big winner appears to be Brocade Communications (BRCD), and shares of the network equipment maker are soaring in the premarket thanks to better-than-expected July-period results. Meantime, the stock of farm equipment manufacturer Deere & Co. (DE) is indicating a slightly higher opening on upbeat earnings news. On the other hand, investors seem to be taking issue with quarterly results from department store operator Macy’s (M), fiberoptic telecommunications equipment maker JDS Uniphase (JDSU) and, most notably, semiconductor company Cree (CREE). All of these stocks are down ahead of the bell, with CREE showing significant weakness. – 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 - Stocks began yesterday's session notably to the downside on concerns about possibly pending Federal Reserve monetary action and unanswered questions about the economy. In fact, within the first hour, or so, of the trading day, the Dow Jones Industrial Average was already some 75 points into the red. The other averages were weaker as well, with many more losing stocks than winning issues at that point.

The lone economic release of note, moreover, did not spur much buying either, as the Commerce Department reported an hour before the stock market opened that retail sales had ticked up by just 0.2% in July, a tenth of a percentage point below the consensus forecast. However, if we exclude sales of vehicles and parts, to get the so-called core rate of retail activity, spending actually jumped by a fairly vigorous 0.5%, which was a tenth of a percentage point above expectations.

That overall metric was, in truth, rather non-descript, and it did not influence trading to any degree. Of more import for investors, it seems, were the musings of another Federal Reserve official. This time, it was Atlanta Fed President Dennis Lockhart, who intoned that he felt the economic picture was still too mixed for the lead bank to detail an exit strategy from its massive stimulus. Following that issued opinion, the market began to pare its losses, moving past the neutral line by early afternoon.

The positive momentum then continued to build into the mid-afternoon, with the Dow at one point rising to a gain of some 85 points, before further backtracking ensued. The other averages performed in like fashion, while the small- and mid-cap indexes were  a bit weaker, relative to their large-cap brethren. That divergence was a reversal of form from the past few sessions, which had seen the smaller composites do somewhat better. The back-and-forth action then continued into the close, with the market stumbling a bit near the finish line. When all the numbers were in, the Dow was ahead by just 31 points; the S&P 500 was better by almost five points; while the NASDAQ, led by another 20-point plus gain in Apple (AAPL) shares, held onto a 14-point advance. However, the Big Board still saw a decent plurality of losing stocks over winning issues, while the S&P Mid-Cap 400 and the Russell 2000 both ended a bit lower, thereby sustaining their rare underperformance into the close. 

The comments by the Atlanta Fed President, aside, it is quite possible that the Fed will start to taper its popular bond-buying by next month, or at the latest before the conclusion of 2013. That fact should be well discounted by the market, although we sense that the announcement of an actual tapering effort next month could rattle some traders--at least temporarily.

Meanwhile, earnings season is rapidly drawing to a close, with just a few scattered reports of note being issued at this time. To wit, after the market closes today, networking giant and Dow-30 component Cisco Systems (CSCOFree Cisco Stock Report) is due to post its quarterly numbers, while before trading commences tomorrow morning, we are scheduled to hear from retailing behemoth and Dow stalwart Wal-Mart Stores (WMTFree Wal-Mart Stock Report).

As to economic reports of note, the government has just reported that producer prices were unchanged in July--a modest increase had been the forecast--while the same Labor Department will weigh in with data on consumer prices tomorrow morning. Also, tomorrow, the Commerce Department will release July figures on industrial production and factory usage, while Labor will issue weekly metrics on initial and continuing jobless claims. Then, Friday morning will bring reports on housing starts, building permits, and consumer sentiment.

Finally, there were some further mixed performances overnight in Asia, with Japan's Nikkei again closing lower, while the European bourses are also generally mixed this morning. And on our shores, the futures are signaling some light selling at least early in the session. – Harvey S. Katz

At the time of this article's writing, the author had positions in CSCO.