After The Close - The U.S. stock market put in a somewhat weaker session today, as the major averages wandered about with no decisive direction. An attempt to move into positive territory ultimately failed in the afternoon, suggesting that the bulls were not yet ready to take control. At the close of the day, the Dow Jones Industrial Average was off 61 points; the broader S&P 500 Index lost five points; and the NASDAQ slipped seven points. However, the market’s breadth actually suggested a more mixed showing, with advancing stocks about even with decliners on the NYSE. Most of the market sectors declined, with weakness in the healthcare and utility issues. Nonetheless, there were some bright spots, as the basic materials and financial names managed to advance.

Technically, the S&P 500 Index seems to be having some difficulty making a sustained move above the 1,700 mark. This proved difficult in August. Also, more recently the index managed to push through this level for a few days, but quickly pulled back. As this figure corresponds to a large round number it may hold some “psychological” significance with traders, and is worth watching.

With the runup in stocks, and price-to-earnings multiples already a bit elevated, the market may need a catalyst to spur on further gains. That could come from a number of areas, including the upcoming third-quarter earnings season. We are now closing out the quarter, and some favorable pre-announcements might help the bulls. Also, a flurry of merger and acquisition announcements could improve traders’ sentiment. Elsewhere, there is always the Fed and the economy, if not in the United States, then abroad, to provide some impetus to buy.

Meanwhile, the economic news released this morning was generally supportive. Durable goods orders rose modestly in August, after declining in July. Moreover, the housing market continues its recovery. Specifically, new home sales came in at 421,000 units annualized in August, which was better than July’s showing, and slightly higher than analysts had forecasted.

Tomorrow, we receive more housing-related news, as pending home sales for August will be released. Further, the employment situation will be an area of concentration with the release of the weekly initial jobless claims. In broader economy, the third, and final, estimate for second-quarter GDP is due out.

In corporate news, AAR Corp. (AIR) stock traded lower after the aviation technology company put out mixed quarterly results. Conversely, AutoZone (AZO) stock ended higher, after the auto parts retailer released well received figures. - Adam Rosner

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 major U.S. equity fluctuated in a tight band around the neutral line for most of the morning hours. Specifically, the Dow Jones Industrial Average, the NASDAQ, and the S&P 500 Index started the session in the red, but were able to work their way back into positive territory and are now holding modest gains as we pass the midday hour on the East Coast.

Nevertheless, there still seems to be some hesitation on the part of the bulls to add significantly to their positions in a market that is frothy at this moment. Indeed, the S&P 500 Volatility Index (or VIX) is trading at a level that continues to suggest that the market is overextended. In our opinion this backdrop is making it easier for the bears to take some profits, especially in the final hours of the trading day. A few of the prior trading days have seen selling pick up near the end of session. There are a few issues right now that are giving the naysayers some ammunition to strike, including growing concerns about the ongoing budget talks on Capitol Hill. In recent years, the inability of the two political parties to reach a firm solution has spooked the equity market—and the looming possibility of a government shutdown on October 1st   seems to be doing the trick these days.

Meanwhile, the day’s economic news was no help for the bears. Although the reports on both new home sales and durable goods orders for August were far from eyecatching, each came in slightly better than expected and gave the bulls something positive to run with in the first half of trading. Specifically, sales of new single-family homes rose last month, climbing to an annualized rate of 421,000 houses. That represented a 7.9% advance from a year earlier. Also, the Commerce Department reported that durable goods orders rose by a nominal 0.1% in August, which was marginally better than the 0.5% decline for the month that had been the consensus forecast. Too, the latest report was notably improved from the downwardly revised 8.1% plunge recorded in July. This semi-encouraging economic news is giving a nice boost to the economically sensitive sectors. We are seeing some mild leadership today from the basic materials, energy, and industrial stocks. Conversely, some of the more defensive-minded groups, including the healthcare, consumer staples, and utilities issues, are slightly out of favor, which is a notable change from trading earlier this month.

Elsewhere, the news from overseas was not as encouraging as what we saw on the domestic front. To wit, investors were not happy to hear the Deputy CEO of Piraeus Bank say in a media interview that non-performing loans are on the rise and one of Greece’s largest banks will likely need additional loss provisions this quarter. This was another reminder that the sovereign-debt situation in Greece remains far from remedied and additional bailouts for the struggling nation are not out of the realm of possibility. As trading nears a close on the Continent, the major European bourses are modestly lower, but have rallied off of their worst levels, with some of the decent economic news from the U.S. likely offsetting the aforementioned concerns about Greece.

Looking ahead to the second half of the session, it will be interesting to see if the U.S. equity indexes can hold their gains. If the last few sessions have taught us anything, a late-day challenge will probably come from the bears. It is our sense that investors are looking for any opportunity to take profits in an equity market where valuations are quite elevated. There always remains the possibility that the aforementioned contentious budget talks on Capitol Hill could give the bears some fodder to act on. Stay tuned. - William Fergusson

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 SurveyThere is some more earnings news out today. The biggest winner appears to be apparel and accessories retailer Ascena Retail Group (ASNA), which reported better-than-expected July-period results. The stock is up sharply ahead of the bell as a result. Likewise, investors seemed fairly pleased with quarterly results from automotive parts seller AutoZone (AZO), and that stock is up slightly in pre-market trading. Conversely, shares of Crown Holdings (CCK) are indicating a moderately lower opening this morning, after the packaging and container company offered third-quarter earnings guidance that fell short of investors’ expectations. – 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 - It was a ho-hum, listless, and uneventful day on Wall Street yesterday, as an early setback, which had left the Dow Jones Industrial Average lower by some 60 points in the first hour of trading, quickly transformed itself into a solid gain just minutes later. The Dow and the Standard and Poor's 500 Index then weaved in and out of positive territory for several hours thereafter, staying on the plus side of the ledger, if incrementally, for much of the day. However, in the last hour, a selling squall pushed both of those indexes back into negative territory, with the Dow ending up near the day's low. It seems that with so much up in the air, and with valuations still rather frothy, skittish traders do not want to be aggressively buying shares late in the day--at least that has been the case for the past four sessions. Things were better on the NASDAQ, though, as has been the case often recently, as that index managed to finish up three points, while the small- and-mid-cap indexes were relatively better performers, inking small advances. The recently out of favor basic materials issues, notably the steels and mining companies, led the way for the bulls, which managed to record more advancing than declining stocks on both the Big Board and the NASDAQ.

Hurting the market yesterday was caution over the impact of budget negotiations in Washington, as the deadline for a government shutdown grows ominously near. Our sense is that a long shutdown is unlikely, with either a last-minute settlement or a brief closure the most likely outcome. Of course, such a scenario would likely have the unsatisfactory outcome of kicking the can down the road, so to speak. That has happened before.

Still, after that initial setback, which also included some uneasiness over the possibility of a tapering of Federal Reserve monetary policy later this year, the market reversed course by mid-morning and quickly overcame its early losses. In all, the Dow recovered more than 90 points, from trough to peak, lifting that 30-stock composite into the black by more than 30 points at its intraday peak, before selling off again, as noted. The NASDAQ, meanwhile, posted a more formidable gain, which at its best levels of the day managed to approach 25 points. It then retained a small portion of that intraday advance.

Helping the equity market for a time yesterday was a report showing that U.S. home prices had risen strongly in July on a year-to-year basis, the latest date for which such data are available. This was a welcome result, as it again indicated that the recent rise in mortgage rates hadn't yet had a serious impact on housing. Earlier reports on housing starts and sales of existing homes also noted improvement. Now, later this morning, the Commerce Department will release figures for new home sales for August. A gain is likely in that volatile series. Also released yesterday was a report by the Conference Board, a private research organization, in which it was noted that consumer confidence had eased slightly in September, but in line with expectations.

As to other data, tomorrow morning, the Commerce Department will issue its final revision of second-quarter gross domestic product growth. The earlier revision had shown a growth rate of 2.5%; a modest increase over that pedestrian figure is expected, with some pundits forecasting a 2.8% rate of gain in that key series.

Looking ahead, there seems little of note that will light a fire under the bulls just yet. Indeed, the stock market has now been lower for four consecutive sessions, although save for last Friday, when the Dow plunged 185 points, the setbacks have been relatively muted, with yesterday's 67-point Dow decline and proportionately lesser setback in the Standard and Poor's 500 Index being more in line with the typical setback. As to influences in the current session, shares were mixed in Asia overnight, with a material selloff in Tokyo, but a gain in Australia. However, in Europe, after a brief early rise in the principal bourses, the markets have moved to the downside, by 0.3%-0.4% in several cases. And on our shores, the S&P 500 and the NASDAQ futures are now suggesting a modestly lower start to the day's trading, with a further slump in the dollar now emerging as some concern.   - Harvey S. Katz

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