After the Close - The U.S. equity indexes started the session irregularly lower and widened those losses right through to the closing bell. The major averages did make an attempt to work their way almost all the way back from their nadirs at one point in the session, but could not overcome some more selling in the final hour. The bears, who began to show some signs of life late last week, were once again emboldened by growing sentiment that Federal Reserve, despite staying the course with regards to monetary policy at its September meeting, may be about to begin tapering its bond-bonding as early as next month. A few Federal Reserve officials have suggested such in recent speeches and interviews. Also working in the favor of the bears today was the lack of any major news on the economy or from the earnings front.

At the closing bell, the Dow Jones Industrial Average, which introduced three new members today, the NASDAQ, and the S&P 500 Index were down 50, nine, and eight points, respectively. The small-cap Russell briefly moved into positive territory, but ultimately succumbed to the selling, posting a flat reading. Overall, declining issues led advancers on both the Big Board and the NASDAQ.  

From a sector perspective, most of the 10 major groups were in the red, with the financial, basic materials, and consumer staples stocks the day’s biggest laggards. The financial sector was under pressure after a report surfaced that Citigroup’s (C) earnings could be hurt by a recent drop in trading volume. Conversely, it was a good session for those long utilities issues. The technology sector also held its own during the dour session. In the technology space, shares of Apple (AAPL) jumped sharply after the technology behemoth reported that it sold more than nine million of its latest iPhone versions over the launch weekend, topping industry and Wall Street’s expectations. Meantime, fellow smartphone maker Blackberry (BBRY) announced late in the session that it had signed a letter of intent with a consortium led by Fairfax Financial Holdings, a Canadian insurance company, to take the company private in a deal worth $4.7 billion (or $9 a share). The stock, which has been slammed in recent sessions on a weak outlook, rallied ended the session just shy of the proposed price. We would not rule out a higher offer emerging in the coming weeks, though.

As noted, it was a quiet day on the U.S. economic front. However, we did get some mostly positive news from overseas. Specifically, China's HSBC Manufacturing PMI rose to 51.2, from 50.1, which represented its highest reading since April. Meanwhile, a weaker-than-expected reading on manufacturing activity from the euro zone, was offset by a better-than-expected increase in nonmanufacturing for the region. The economic news on these shores picks up tomorrow, however, with reports due on consumer confidence and home prices.

Meantime, the Federal Reserve will likely continue to be a hot-button topic for the investment community. Specifically, investors reacted to commentary from Dallas Fed President Fisher—who will be a voting FOMC member in 2014—that he argued against a decision at the September meeting to keep bond buying unchanged and to comments from New York Fed President William Dudley that the framework outlined by Chairman Bernanke to begin tapering bond purchases by the end of this year is “still very much intact.” All of the aforementioned remarks gave some fodder for which the bears to run with today.

Looking ahead, our sense is that the news surrounding the economy, and what effect the data will have on the investment community’s perception of what the Federal Reserve will do next, will play a big role in determining which way the market heads over the next few weeks ahead of the third-quarter earnings season. - 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 U.S. stock market traded lower this morning, and so far there has been little to suggest that the direction will reverse course in a meaningful way. At past noon in New York, the Dow Jones Industrial Average is off 59 points; the broader S&P 500 Index is down 10 points; and the NASDAQ is shedding 23 points. Market breadth confirms a somewhat negative bias to today’s session, as declining issues are slightly ahead of advancers on the NYSE. Most of the market sectors are in negative territory, too. There is pronounced weakness in the financial sector, as losses in the banks and services names are offsetting gains in the REITS. Healthcare stocks are also lagging, as the biotechnology names are down sharply. Meanwhile, investors seem a bit more positive about the utility sector today, now that fears about rising interest-rates seem more tempered. The basic materials stocks are also displaying some relative strength, thanks to some interest in the precious metals names.

Technically, the S&P 500 Index is giving back some of the big gains logged over the past two weeks. Some pullback or consolidation is not unusual after such a run, as traders may be waiting on the sidelines for a better entry point, or possibly taking profits. So far, we have seen little high-volume selling taking place that might indicate that the bulls are in any way giving in. However, sentiment is a bit more apprehensive today, as the VIX is up 11% to 14.60.

Meanwhile, traders received no material economic news this morning. As noted, a lack of information in the United States does not always help the situation, as it may prompt traders to take a closer look at the international stage. Tomorrow, there will be a few economic reports released. They will include the Case Schiller housing price figures, and the Conference Board’s consumer confidence reading for September.

In corporate news, Apple (AAPL) stock is moving higher today, after the company reported strong sales of its latest iPhone offering.  Meanwhile, on a related note, Pandora Media (P) stock is trading lower, as investors may be more concerned that a music service from Apple may present competition. Also, mobile device maker BlackBerry (BBRY) stock continues to drift lower on concerns about its outlook. - 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 Survey – Corporate news is rather light today, although there are several stocks that will likely see active trading. Shares of BlackBerry (BBRY) appear to be seeing a bit of a hangover from Friday, when the smartphone maker preannounced dismal August-period results and said that it would lay off 4,500 workers. The stock plunged in late-afternoon trading on Friday and looks poised to extend its losses today. On the other end of the spectrum, shares of Apple (AAPL) are up moderately ahead of the bell, thanks to strong sales of the computer and personal electronics company’s latest iPhone models. Indeed, Apple said that it sold nine million iPhone 5S and 5C devices in the three days since the smartphones were available. Finally, the stock of Citibank (C)is indicating a slightly lower opening this morning, likely due to reports that the financial services company’s trading revenues stumbled in the third quarter. – 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 - Just when it appeared as though the time-honored tradition of plain old-vanilla profit taking had gone out of style on Wall Street, in came the bears and, indeed, fashioned just such a selling spree this past Friday, in somewhat stepped-up volume for a late summer day. Perhaps September was finally living up to its advanced billing as one of the weakest months of the year, or more likely it was comments by Federal Reserve officials just two days after the central bank had given the bulls something to cheer when it opted to stay the course on its aggressive bond buying for at least another month or two.   

Whatever the case, the bears started to sell late in the morning and never got off of the pedal, as they reversed the outsized gains of Wednesday. To wit, the equity market has now suffered back-to-back declines, although Thursday's setback had been half-hearted and indecisive. There was no such in-decision on Friday, however, as the sellers gathered en masse to take the 30-stock Dow Jones Industrial Average down 185 points, thereby erasing all of Wednesday's gains, and then some. The Standard and Poor's 500 Index pulled back by 12 points, while the tech-heavy NASDAQ, up for much of the day, finally faded in the afternoon and closed off by 15 points. The small-and-mid-cap indexes also backtracked, but the major damage was done on the Dow, in large part because the key casualties were in the industrial, telecom, and basic materials areas, where the Dow is heavily represented.

Behind this selloff, we fathom, were some cautionary comments from St. Louis Federal Reserve Bank President James Bullard, who intoned that a reduction in the Fed's $85 billion monthly bond purchase could begin as soon as next month. Kansas City Fed Bank President Esther L. George, meanwhile, told the Shadow Open Market Committee in New York that the central bank needs to move away from the bond-buying policy and called the decision not to reduce such purchases ''disappointing.'' Of note, she had been the lone dissenting vote on Wednesday when the Fed had opted by a clear majority to stay the course for now.

Going forward, there seems to be some risk that this latest falloff could mushroom into something bigger, although, for now, most pundits believe that any setbacks will be contained. There is logical justification for this more benign outlook, as most prior periods of weakness have been modest and fairly short lived over the four-and-a-half year life of this historic bull market. We note, however, that just as no one rings a bell at the top or bottom of a market cycle, no one also rings the proverbial bell when some serious profit taking--or worse--is about to get under way. For now, there appears to be some uneasiness, but no panic in the frothy equity markets.

Meanwhile, we now face a new week, and one in which we will get a succession of key data issuances, starting tomorrow when the Conference Board will issue its September survey on consumer confidence. A small easing in that important metric seems likely, according to most pundits. Then, on Wednesday, the Commerce Department will release reports on durable goods orders and sales of new homes. Both surveys are forecast to show modest improvement. Thursday will then follow with data on weekly jobless claims and revised second-quarter GDP. Claims are estimated to have risen from the prior week's multi-year low, while estimates are that GDP will be revised upward from 2.5% to 2.8%. The week will then conclude with data on personal income and personal consumption expenditures.

As to the markets in the day ahead, the overseas arena is mixed, while the same story prevails on our shores, with the S&P 500 futures pointing to an opening market decline, while the NASDAQ suggests a modest uptick. – Harvey S. Katz

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