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After the Close - It was not a good day for those long equities. With the exception of the consumer staples sector, there were not many places for the bulls to hide today. Throughout the trading day, market breadth was decisively negative, as declining issues significantly outnumbered advancers on both the New York Stock Exchange and the NASDAQ. By the closing bell, the Dow Jones Industrial Average, the NASDAQ, and the broader S&P 500 Index had shed 130, 57, and 20 points, respectively, with selling intensifying in the final hour.

Our sense is that investors are growing skittish that the Federal Reserve, which will hold its two-day monetary policy meeting next Tuesday and Wednesday, will begin to taper its bond-buying activity. The accommodative monetary measures have been credited greatly with pushing equities higher in recent years and, thus, investors, whether or not justified, think that a tightening of monetary policies may pull the rug out from under stocks and result in a correction in a market that is overbought. The jump in the S&P 500 Volatility Index (or VIX) and the more pronounced losses in the small- and mid-cap markets would suggest that investors are becoming a bit more cautious. Speaking of the Russell 2000, it fell below its 50-day moving average in intra-day trading today. This bears watching from a technical analysis standpoint, as the small-cap stocks have historically led the market in both directions. 

What likely prompted the latest sentiment that the central bank may begin tapering, perhaps as soon as next week, was news last night that the Senate and House had agreed on a two-year bipartisan budget deal, which will allow the nation to avoid another government shutdown in the new year. With this fiscal issue presumably resolved, the prevailing thought is that Federal Reserve policymakers will be more inclined to slowly begin removing its monetary support. To this end, interest-sensitive stocks, including shares of the major homebuilders, were lower today. 

Also not helping equities was mostly disappointing earnings news. Of note, shares of warehouse club operator Costco (COST), tax preparer H&R Block (HRB), mining equipment manufacturer Joy Global (JOY), and clinical laboratory company Laboratory Corporation of America (LH) finished lower after reporting their latest quarterly results. Investors should also note that after the closing bell Hilton Hotels (HLT) is scheduled to IPO, marking the biggest hotel initial public offering on record to date. On the economic front, there was little news of interest. A report at 2:00 P.M. (EST) noting that the November Treasury Budget showed a deficit of $135.20 billion, which followed the prior month's deficit of $172.10 billion, had little to no impact on equities. This may change tomorrow, with reports due on monthly retail sales and weekly jobless claims.

As noted, it was mostly a sea of red ink across the 10 major sectors. The day’s biggest laggards were the energy and basic materials groups. The energy stocks were hurt by data showing a buildup in crude supplies. Conversely, the consumer staples stocks were the lone bright spot. Within this consumer noncyclical sector, shares of the non-alcoholic beverage, personal care products, retail drug, and food distribution companies fared the best. - 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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12:30 PM EST - The U.S. stock market is heading lower so far today, and the major averages are currently stuck near their session lows. News that politicians in Washington have reached a budget agreement, and a lengthy debate may have been averted, has failed to produce much enthusiasm among traders. As we pass the noon hour in New York, the Dow Jones Industrial Average is off 95 points; the broader S&P 500 Index is down 15 points; and the technology-heavy NASDAQ is now off 38 points. Market breadth suggests widespread weakness, as declining issues are outnumbering advancers by about three to one on the NYSE. There are roughly 134 stocks making new lows, versus only 51 at new highs on the NYSE, and that, too, suggests some caution. All of the market sectors are declining. There are losses in the basic materials issues, with some of the metals names off sharply. The energy sector is also quite weak, as the pipeline companies are out of favor. While there is little strength in the market today, some of the retail and food-related consumer names are bucking the downtrend.

Technically, the market has struggled to move higher, following the large advance logged last Friday. Today’s selling puts the S&P 500 back below 1,800, a level which may well hold some “psychological “ importance with traders and retail investors. The VIX is moving higher today, too, suggesting that traders may be feeling less secure about the market’s direction.

Meantime, the economic news was minimal this morning. However, tomorrow things pick up, as we get a look at the weekly jobless claims, monthly retail sales, import and export prices, and business inventories.

In the corporate arena, a few high-profile companies reported news today. In the financial arena, Mastercard (MA) is seeing its nearly $800 stock move higher, as that company announced plans for a ten-for-one stock split, a divided increase, and a large share repurchase program. In retail, things did not go as well for Costco (COST), after the shopping club company put out weak results, and those shares are off. Also, Joy Global (JOY) stock is lower, after the mining equipment company issued disappointing quarterly figures, and put out cautious 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 SurveyThere is some earnings news to be aware of this morning. On the bright side, shares of Smith & Wesson (SWHC) are moving nicely higher in the premarket, after the firearms manufacturer reported solid October-period results. Likewise, updated guidance from apparel and accessories retailer Urban Outfitters (URBN) was well received on Wall Street, and the stock is up in pre-market trading. On the other hand, shares of warehouse club operator Costco (COST), tax preparer H&R Block (HRB), mining equipment manufacturer Joy Global (JOY), and Laboratory Corporation of America (LH), one of the nation’s largest independent clinical laboratory companies, are all moving lower ahead of the bell on earnings related news, with LH and JOY showing the most weakness. Elsewhere, the stock of Scripps Networks International (SNI) is indicating a sharply higher opening this morning, after reports surfaced that it may be the subject of a takeover bid by fellow media company Discovery Communications (DISCA). – 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 - The stock market, fresh off of a stellar performance last Friday, and a largely unchanged outcome to start out the week on Monday, pulled back for much of the session yesterday, in a wholly indifferent showing characterized by strength in the gold and materials issues, but modest weakness in most other groups. So, after several half-hearted and generally unsuccessful efforts to right the ship during the session, equities, in general, closed somewhat lower, but with more notable weakness in the small-cap Russell 2000 Index, which fell back by nine points, or almost one percentage point. The latter pullback suggests that there may be some group rotation going on at this time, which is not unusual or even undesirable after a long bullish run, such as we have enjoyed thus far this year. 

All told, the Dow Jones Industrial Average eased by 52 points; the Standard and Poor's 500 Index crept lower by six points; and the tech-laden NASDAQ, which was in and out of positive territory throughout the listless session, falling back by just eight points. In the meantime, losing stocks held sway over winning issues on both the Big Board and the NASDAQ. All of this took place on an ordinary December day that left neither the bulls nor the bears all that satisfied.

Once again, the big influence was the Federal Reserve. It is not as though the central bank did anything new of note, nor issued any market moving statements, as it has often done in the past. It is just that we now are only a week away from the next FOMC meeting, a get together that some pundits believe will produce the long-anticipated initial tapering of the Fed's highly popular bond-buying program. Such a shift, albeit likely incremental at most, also would be more psychological than tangible in impact, we sense. Still, it would be the first of a likely succession of such moves and, as such, could occasion a reaction in the markets.

Meanwhile, yesterday's moves were generally small. However, we did see some bottom fishing in the gold issues and other metals stocks, and some backing off in certain high-yielding consumer staples and utilities issues, as well as a few of the blue chips in the Dow. On the whole, though, most of the individual moves were minor, as one would expect given the paucity of economic and earnings news and the uncertainties engendered by the upcoming FOMC meeting.

Then, after the close, Congress announced that negotiators for the two parties had reached a budget deal that would raise military and domestic spending over the next two years. The deal, which observers see as modest in scope, still marks a truce of sorts in the budget fights that had again threatened to result in a government shutdown early next year. Now that possibility has been shelved. Now, presumably, this deal will allow budget negotiators to tackle much more contentious issues, namely healthcare and other entitlements, including Medicare and Social Security. The deal will now go to the House and Senate for approval. Most expect that effort to be successful.

Of course, with that key and highly contentious issue out of the way, one would suspect that the equity futures would be coasting to a good pre-market gain. But, although the futures have now erased some earlier losses, they are just slightly in the black. One explanation might be that with the budget likely out of the immediate way as a concern, the Fed might be more disposed to start tapering its bond buying than had an accord not been effected.

Finally, we seem to be in a holding pattern in the market near all-time highs on the Dow and the S&P 500 Index. That could be a possible top, or just another small barrier on the way to still higher equity prices. The Fed and futures earnings outcomes could be critical in gauging which way stocks ultimately go. – Harvey S. Katz

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