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After The Close - A disappointing week for those long equities fittingly ended on a sour note. The Dow Jones Industrial Average and the broader S&P 500 Index finished 70 and seven points lower today, resulting in respective weekly setbacks of 1.2% and 1.4%. The tech-heavy NASDAQ, though off six points today, managed to end the week marginally higher. Declining issues led advancers by a notable margin on both the Big Board and the NASDAQ in the latest session. The primary culprit behind today’s selling was once again fears that this weekend’s budget talks on Capitol Hill will remain contentious and produce minimal long-term fiscal solutions. Investors have seen this soap opera unfold before, which has raised the volatility in the equity market. That was certainly the case today, as the S&P 500 Volatility Index (or VIX), also known as fear gauge, jumped by some 10% on concerns that the contentious budget talks may lead to a government shutdown on Tuesday.

From a sector perspective, it was a sea of red ink across the top 10 groups, with neither the cyclical nor noncyclical stocks spared. Even the consumer discretionary stocks, which were higher for most of the session, helped by a decent report on personal income and spending (more below), succumbed to the selling. Overall, the biggest laggards were the utilities and those sectors most closely tied to the economy, including the basic materials, industrial, and financial groups.

As noted, fears that the budget talks and related debt-ceiling negotiations will prove fruitless and eventually produce another “kick the can down the road” solution has spooked investors. The fallout from the lack of a concrete agreement on a new budget, along with the possibility of a cutback in bond-buying stimulus by the end of this year, has investors somewhat worried that an economy that is improving, but far from firing on all cylinders, may not be able to withstand such a one-two punch. The stocks of economically sensitive companies felt the biggest brunt of the investment community’s growing anxiety, which also is making fixed-income securities more desirable these days. In fact, the yield on the 10-year Treasury, which moves in the opposite direction to the price, ended the week at 2.62%; it nearly hit 3.00% earlier this month.

The aforementioned budget talks overshadowed a decent report issued today on the domestic economy. Specifically, the Commerce Department reported that personal income and spending was moderately better in August. That report is not surprising given the recent pickup we have seen in manufacturing and nonmanufacturing activity. Next week, we will get the latest update on those two important sectors of the U.S. economy, as well as the much-anticipated report on the labor market. The employment data, scheduled to be released next Friday, could prove a game changer, as it will be used by the Federal Open Market Committee in determining the central bank’s next course of action with regards to monetary policy.         

Looking ahead, the aforementioned U.S. budget talks and the domestic economic news will remain on the minds of investors next week, especially with earnings news at a minimum right now. However, that all will change the following week as third-quarter earnings season officially kicks off.   - William G. Ferguson

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

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12:20 PM EDT - The U.S. stock market got off to a weak start this morning. However, since then the bulls have started to return and stocks are now well off of their session lows. It remains to be seen if a full recovery will materialize. Notably, this week has not been constructive for equities, and the mood is less than euphoric. Further, it is a Friday, and some traders may not want to hold positions through the weekend, especially with the clock ticking down to a hoped-for budget accord in Washington. At about noon in New York, the Dow Jones Industrial Average is still off 78 points; the broader S&P 500 Index is down seven points; and the NASDAQ, which is making a bold attempt to recover, is off just three points. Market breadth is still quite negative, as declining stocks are ahead of advancers by about two to one on the NYSE. Most of the market sectors are slipping, with pronounced weakness in the consumer, industrial, and basic materials names.

Technically, the S&P 500 Index has shown some weakness over the past several days. The pullback was not entirely unexpected, as the market had staged a strong advance in early September, and the market had become “overbought”. With the recent dip, the broad S&P 500 index is close to testing its 50-day moving average at 1,680. Notably, this level functioned as an area of support in late July and early August, and may again be a key point to watch. The VIX is up about 6%, to 14.92, suggesting that traders are feeling a bit more apprehensive today.

Meanwhile, it has been a light day for economic news. However, we did receive a couple of reports. Specifically, the University of Michigan's consumer sentiment survey came in with a final reading of 77.5 for the month of September, which was slightly better than had been anticipated. Also, personal income and spending rose modestly in the month of August, and in line with expectations.

Finally, some individual stocks are making news today. Of note, shares of recent Dow addition Nike (NKE - Free Nike Stock Report) are trading higher, after the sneaker maker put out a good report yesterday afternoon. In retail, J.C. Penny (JCP) stock, which is has been quite weak lately, is off sharply again today, falling to a 52-week low, as the company announced a large share offering. Meanwhile, among other names, Nektar Therapeutics (NKTR) stock is off sharply, on drug-related news. -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 Survey – Nike (NKEFree Nike Stock Report), one of the three-newest members of the Dow-30, made a good first impression, reporting solid August-period results. Demand for the athletic footwear, apparel, and equipment company’s products was strong, save for China. NKE shares are up notably ahead of the bell as a result. Investors were also pleased with August-quarter financials from retailer The Finish Line (FINL), causing its stock to move nicely higher in pre-market trading. Elsewhere, mobile phone developer and manufacturer BlackBerry (BBRY) released dismal August-interim results, in line with the preliminary figures the company announced last week. The equity is indicating a slightly higher opening this morning, though it will likely trade more on M&A news (BlackBerry recently struck a deal to be acquired) than earnings in the near term. Elsewhere, shares of J.C. Penney (JCP) are down ahead of the bell, after the struggling department store retailer priced a secondary stock offering of 84 million shares at $9.65 each as it seeks to raise capital to support its ongoing turnaround efforts. – 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 got out of the gate quickly yesterday, in an impressive early comeback attempt by the bulls following a handful of consecutive declines in the Dow Jones Industrial Average and the Standard and Poor's 500 Index. In fact, after a few minutes of trading, the Dow had jumped to a gain of better than 110 points, while the broader based S&P had moved ahead by some 10 points. In the meantime, the NASDAQ, buoyed by a chorus of initial tech gains, perked up, too, climbing 35 points in short order.

Underpinning that bounce were supportive economic metrics, most notably a report showing a surprising further decline in weekly jobless claims, Such improving numbers suggest that employment levels, which have been uneven for the better part of this year, may soon start to strengthen at a steadier pace. Also, the Commerce Department reported that its final revision of the nation's second-quarter gross domestic product showed a gain of 2.5%. While that was a bit below the expected increase of 2.6%, it was a solid showing, nonetheless, and compared most favorably with the first-quarter growth rate of just 1.1%.

Add in some initial optimism that there might yet be a budget settlement in time to avert a threatened October 1st U.S. government shutdown, and we appeared to have the makings of a good-sized rebound in a recently weak equity market. However, those upbeat sentiments could not be sustained throughout the session, and the sellers appeared again late in the morning, much as they had  over the past several sessions. But even though a good portion of the early Dow gain was pared, mostly on renewed pessimism that a deal would not get hammered out in time to avoid a shutdown, there just did not seem to be any major incentive to cut positions fully. So, during the lunch hour in New York, the bulls reappeared and injected some welcome stability into the market.      

Then, as the afternoon wore on, the averages started to meander about, staying in the plus column, but exhibiting little of the early swagger that had initially emboldened a chastened group of bulls. However, when the late selling that surfaced in recent sessions was successfully held at bay, the bulls managed to partly right the ship into the close. True, the gains weren't memorable, but a portion of the early advance was retained. In all, on the heels of five straight losses in the Dow and the S&P, the former index rose 55 points and the latter recouped six points, climbing to within a point and a half of the psychologically important 1,700 level. The Dow, meanwhile, is now at 15,328, which is just over 300 points from the all-time peak, which was set last week.

Will this bargain hunting in a still somewhat overbought market last, or are we just holding on until we hear more on the budget and debt-ceiling issues? It is too early to tell, but for all of the market's year-to-date strength, which is still quite formidable, there are questions that need answers as we near the conclusion of the third quarter. To wit, in addition to the standoff in Congress, there are unanswered questions about Federal Reserve monetary policies, uncertainty about who will succeed Ben S. Bernanke as Chairman of the central bank when he steps down in January, unresolved issues on the economic front, and the unknowns as we approach the start of third-quarter earnings reporting season. 

Now, as the fast-ending third quarter winds down and the penultimate session of the period is about to begin, we note that stocks in Europe this morning are lower, despite a favorable report from the United Kingdom that consumer confidence had ticked up in the latest month. Most of the bourses were down less than a percentage point, though. And on our shores, the Dow, the S&P 500, and the NASDAQ futures are all notably lower, most likely on concerns about the tense dealings in Washington, and notwithstanding an expected early bounce by one of the three new names on the Dow, NIKE (NKEFree Nike Stock Report), which has reported materially better-than-expected earnings in its latest quarter. – Harvey S. Katz  

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