After The Close - The U.S. equity market picked up where it left off last week, specifically with the bears once again in control of trading. Much like last week, continued jitters about the prospect of the Federal Reserve tapering off its bond purchases by early as next month emboldened the bears. The Dow Jones Industrials fell 71 points today, marking the first four-day losing streak for the index of 30 bellwether companies in 2013. The broader S&P 500 Index also finished in the red. Meantime, the NASDAQ performed relatively better for most of the session on the strength of the technology stocks, including shares of industry behemoths Apple (AAPL) and Intel (INTC -Free Intel Stock Report), before succumbing late to the bearish sentiment that is hanging over equities these days. The weakness in the small- and mid-cap areas also underscored the generally negative tone to trading. Overall, declining issues led advancers on both the New York Stock Exchange and the NASDAQ with the spread at more than three-to-one on the Big Board.

As noted, the likelihood that the Federal Reserve will begin to scale back on its accommodative quantitative easing measures by early as next month is weighing on equities. Such a maneuver is generally viewed unfavorably by equity market participants—and that certainly seems to be the case these days. In recent years, historically low interest rates have made stocks a much more attractive option than lower-yielding fixed-income securities. Investors are now concerned that rising rates will change that thinking and shift a sizable amount of money out of stocks and into fixed-income vehicles, especially if yields on the latter were to rise further from here.

If anything, the recent jump in lending rates—the yield on benchmark 10-year Treasury note continues to rise, finishing today’s session at 2.88%--is prompting some sector rotation in the equity market. Not surprisingly, it was another difficult session for the higher-yielding stocks, including the telecom and utilities issues. The energy stocks were also laggards today, as crude oil prices fell on the New York Mercantile Exchange. Conversely, there was selective mild buying interest in the technology issues and the defensive-oriented healthcare stocks, particularly the large-cap names in both sectors.

The increased attention given to the Federal Reserve’s next move—we should learn more about the central bank’s thinking on Wednesday afternoon with the release of the minutes from the Federal Open Market Committee meeting—was likely prompted by the lack of news on both the economic and business fronts. The dearth of headline news limited the equity market activity, as both buyers and sellers showed a lack of conviction. Some hesitation is likely due to investors being in a wait-and-see mode ahead of Wednesday’s Federal Reserve update.

Looking forward, housing will dominate the rest of this week’s economic news with data due on existing and new home sales on Wednesday and Friday, respectively. On the earnings beat, we will receive the latest quarterly results from The Home Depot (HDFree Home Depot Stock Report), Hewlett-Packard (HPQ -Free Hewlett-Packard Stock Report), BHP Biliton (BHP), J.M. Smucker (SJM), Lowe’s Companies (LOW), and a host of apparel retailers. The big day for the retailers comes this Thursday. Our sense is that it will take a lot of upbeat news from these two fronts to change the current sentiment on Wall Street, which is being driven by continued fears about a pullback in monetary support from the Federal Reserve. -William G. Ferguson

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


12:30 PM EDT - The U.S. stock market is putting in a mixed-to-lower session so far today. At just past noon in New York, the Dow Jones Industrial Average is off 5 points; the broader S&P 500 Index is lower by just one point; and the NASDAQ, which is bucking the downtrend, is advancing 15 points. Notably, market breadth is somewhat weak, as declining stocks are outnumbering advancers by about 2 to 1 on the NYSE. Furthermore, most of the market sectors are in negative territory. There is weakness in the energy group, as the price of crude oil declined earlier today. The financial names also are trading lower. However, there are some bright spots. For instance, there is some leadership in the technology group, thanks to gains in the Internet and computer hardware names. The healthcare stocks are also doing well, helped by some buying in the biotechnology area.

Technically, the market has been pulling back a bit lately, and we are now about 3% off the August high of nearly 1,710 on the S&P 500 Index. The index is currently testing it 50-day moving average at 1,657. Hopefully, the market can find some support at this widely-watched technical level. Even though volumes have been strong during recent declines, so far any selling has been orderly, and not accompanied by any panic. The bulls have made attempts to support equities, when weakness has unfolded. However, there seems to be some fatigue setting in. 

Meanwhile, there have been no notable economic reports released this morning, and that may be creating an information vacuum for traders. For now, the attention seems to be on the direction of interest rates. Specifically, the yield on the government’s 10-year note is running close to 2.88%, up sharply from the 52-week low of 1.55%. Bond traders may be unwinding their positions, in the expectation that the Fed will reduce its purchases. There is also some uncertainty about the leadership at the Fed, as a new Chief should soon be installed. Meantime… 

It is a slow time for corporate earnings reports. However, Saks (SKS) stock is off, after the retailer put out disappointing results.  In the M&A area, Zillow (Z) has agreed to acquire StreetEasy. - Adam Rosner

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


Stocks to Watch from The SurveyEarnings news is quite light today, though this week will see a significant number of reports coming from retailers, many of which have fiscal years that end in January. There are a few stocks that will likely see active trading today, however. Notably, shares of Chesapeake Energy (CHK) are moving modestly higher ahead of the bell, after famed investor Carl Icahn announced that he has increased his stake in the oil and natural gas exploration and production company to nearly 10%. 

Elsewhere, several companies have announced changes to their corner offices. U.S. Steel (X) has named Mario Longhias, the steelmaker’s current President and COO, as CEO effective September 1st. Additionally, Yahoo! (YHOO) has named Maynard Webb as permanent Chairman of the Internet company (Mr. Webb had been acting as interim Chairman). Both stocks are little changed in the premarket. – 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 - Equities eased modestly on Friday, to close out the worst week for the stock market, at least in terms of the Dow Jones Industrial Average, thus far this year. In all, that 30-stock composite ended the five-day stretch off by 2.2%, while the Standard and Poor's 500 Index closed 2.1% in the red for the week, its second poorest showing this year.

Behind this rare selloff, which still left stocks with strong gains for 2013, is a general fear of rising interest rates. This foreboding reflects the sense that the Federal Reserve will shortly vote to rein in its aggressive monthly bond purchases. This very popular program, which is designed to lower a range of long-term interest rates, some of which are designed to make it easier to buy and afford a new home or a new car, could be tapered back by as early as next month. The indication, meantime, is that the program could be scrapped by as early as mid-2014.

In consequence, long-term interest rates are starting to climb seriously. To wit, the yield on the benchmark 10-year Treasury note, which had fallen as low as 1.55% during the past 12 months, climbed to 2.86% at its highest point on Friday, before settling in at just under 2.83%. The note is now passing hands at 2.84%. The yield on the companion 30-year Treasury bond, meanwhile, has settled in at 3.86%. In truth, such returns are not yet meaningful competition for stocks, as many good-quality equities, including some on the Dow-30, have better yields; however, such bond yields are least causing investors to take a look at such investment alternatives.

Overall, the Dow shed 31 points on Friday, while the S&P 500 Index lost five-and-a-half points, and the NASDAQ fell a bit more than three points. It was not a major selloff, to be sure, but coming on top of the prior two days, the pullback is starting to get the notice of some traders, especially at a time of rising bond yields.

Also, of some concern is the economy. Although most of the recent indicators have been at least moderately supportive, including some better data on housing starts and building permits issued on Friday morning, we are still getting a few less-than-compelling issuances. Of note, here, was Friday's consumer sentiment survey issuance from the University of Michigan, which fell modestly, but surprisingly. The sudden spike in mortgage rates and the concerns about a less generous Federal Reserve are, perhaps, giving consumers some cause for concern.

Whatever the reasons for the sudden drop in consumer sentiment, the ramifications are clear, namely that should this trend persist, there would be a good chance for a sufficient slowdown in home buying, auto sales, and retail activity to perhaps put the expansion at some risk of slowing down materially once again. But that is getting a little ahead of ourselves. For now, this is a metric worth watching. Also, of note, will be the consumer confidence reading put out by the Conference Board. That metric, issued on the last Tuesday of the month, will be very closely watched in light of the sentiment miss from the University of Michigan.

Elsewhere, this will be a somewhat busy news week, with data out later this morning on the leading indicators for July kicking off the five-day stretch. Then, on Wednesday, we are due to get a report on sales of existing homes. Thursday will follow with the weekly survey on jobless claims. The week will conclude with the monthly compilation on new home sales. In addition to this data, we will also get the minutes of the last FOMC meeting released this week, while the world's central bankers will meet in Jackson Hole Wyoming to discuss the global economy. 

As to the markets this morning, they are mixed to lower around the globe. The futures are suggesting a similar start to the trading day on our shores, meanwhile. – Harvey S. Katz          

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