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After The Close -Wall Street took it on the chin today, as a combination of weaker-than-expected economic data out of China, unexciting corporate earnings reports on these shores, and frothy valuations took a toll on investor sentiment. At the close, the Dow Jones Industrial Average was off 176 points and the NASDAQ was down 24 points, although both of those indexes finished off of their worst levels of the session. Market breadth was poor, with the number of declining stocks well ahead of those advancing.

The main catalyst behind the selloff seemed to be a report showing China’s manufacturing sector contracted slightly in January, rather than inching ahead, as expected. That caused a steep, 1.5% drop in the Hang Seng index, and set the stage for today’s market uneasiness.

Truth be told, the modest reversal in China’s manufacturing sector is only a partial down payment for the camp that is negative on that country’s near-term prospects. The bears see a nation short of consumer buying power to follow up on what has been a dazzling ride in attaining its status as the world’s second largest economy in a relatively short space of time. And that line of thinking has some validity. But we also note that the United States has gone through many boom-and-bust cycles on its way to becoming the world’s great economic power. It would be unusual if China did not have a few bumps in the road in its own journey. Overall, the poor reaction to China’s manufacturing data was likely partly owing for the need to take profits after the big run-up in stocks over the past few years.

As is often the case, the financial sector fared poorly with the discouraging news from abroad. Financial companies are seen as interconnected through international banking channels and, as such, potentially more vulnerable to problems arising from overseas. That contributed to a poor showing among banking stocks, such as JPMorgan Chase (JPM - Free JPMorgan Stock Report) and Citigroup (C). 

The energy and basic materials sectors also lagged, since China has been seen as the fountain of growth for their commodities. Stocks such as oil producer Continental Resources (CLR) and Dow Chemical (DOW) were relatively weak as a result.

Bucking the trend on the upside were the shares of railroader Union Pacific (UNP) and media company Netflix (NFLX), which posted strong earnings. Meantime, gold stocks, such as Agnico Eagle Mines (AEM), enjoyed the benefit of rising gold prices on the day.

Tomorrow brings a fresh batch of profit reports out of Corporate America, which could change the thinking that this earnings season has been lacking many upside surprises.  -Robert Mitkowski

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 trading sharply lower today. At past noon in New York, the Dow Jones Industrial Average is off 194 points; the broader S&P 500 Index is down 20 points; and the technology-heavy NASDAQ is lower by 40 points. Market breadth is quite negative, as well, with declining stocks outweighing advancers by about two to one on the NYSE. All of the major market sectors are struggling, with particular losses in the financial issues. The consumer names are weak, as well. In contrast, the utilities are holding up better than many other groups, as investors may be becoming more risk averse. Notably, weakness in our market seems to have gotten its start overseas, as stocks in Asia closed out a weak overnight session with sharp losses on The Hang Seng. A weak manufacturing report out of China may well have been the cause of that decline.

Technically, the U.S. market has had trouble making a sustained push higher in recent weeks. Moreover, while the NASDAQ has held up relatively well, recent weakness in the Dow is cause for concern. Indeed, today’s move lower puts that blue chip average at its 50-day moving average, where hopefully for the bulls, it can find support. The VIX is trading about 8% higher today at nearly 14, suggesting investors are becoming less complacent. It should be noted that stock valuations, as measured by price-to-earnings multiples, may have become elevated in recent months, leaving little room for any earnings disappointments. Further, the initial fourth-quarter reports that we have been seeing lately, have not been overly encouraging.

Investors received a few lackluster economic reports this morning. The weekly initial jobless claims came in at 326,000 for the week ended January 18th. This reading, more or less, matched expectations. Meanwhile, existing home sales came in at 4.87 million annualized units, in December, which was a bit softer than had been widely anticipated. There are no major economic reports slated to be released tomorrow.

In corporate news, earnings reports continue to dominate the news. Specifically, Netflix (NFLX) stock is up sharply, after the high-flying media company put out a strong release. In technology, F5 Networks (FFIV) shares are rising, after that company delivered healthy figures. In the Airlines,  United Continental (UAL) shares are slipping, even though that company put out decent results. - 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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10:30 AM EST - The U.S. stock market is trading sharply lower this morning, as traders have become concerned about the pace of expansion in China. Notably, the HSBC Flash Manufacturing PMI for that region contracted for the first time in many months, and investors may be concerned that this will hurt the global economic recovery. At about 10:30 AM (EST) in New York, the major averages are off about 1%. The Dow Jones Industrial Average is down 151 points; the broader S&P 500 Index is lower by 16 points; and the tech-heavy NASDAQ is shedding 39 points. There is widespread selling of equities, as decliners are outpacing advancers by a wide margin.  All the major market sectors are also in negative territory with the financials leading stocks lower.   - 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 SurveyWe are now in the thick of earnings season, and investors have a number of reports to digest this morning. The big winners are clearly entertainment content provider Netflix (NFLX) and Logitech (LOGI), which manufactures peripherals for personal computers. Indeed, the stocks are soaring ahead of the bell thanks to better-than-expected December-period results and rosy outlooks. Shares of telecommunications equipment company F5 Networks (FFIV) aren’t far behind, either. Other stocks moving higher (albeit more modestly) on earnings news include online auctioneer eBay (EBAY), aerospace/defense company Lockheed Martin (LMT), airline operator Southwest (LUV), pharmaceutical products distributor AmerisourceBergen (ABC), and railroad Union Pacific (UNP).

Not all earnings reports were so upbeat, however, and investors appear to be taking issue with quarterly reports from restaurant operator McDonald’s (MCDFree McDonald’s Stock Report), hard disk drive maker Western Digital (WDC), mobile phone developer Nokia (NOK), airline operator United Continental (UAL), and flash memory card manufacturer SanDisk (SNDK). – Matthew E. Spencer

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

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Before The Bell - The stock market, following a mixed performance to start the holiday shortened trading week on Tuesday, struggled to an early modest gain yesterday, with generally upbeat earnings helping to lead the Dow Jones Industrial Average to an early pickup of some 40 points. The NASDAQ, meanwhile, also left the starting gate quickly, but, while the Dow soon faded, the tech-laden NASDAQ, raced ahead and held the lead among the large-cap indexes all day long. This had been the pattern the day before. The Standard & Poor's 500 Index moved in and out of positive territory during the latest session, in a performance that likewise was similar to that of the day before. 

All told, the NASDAQ, abetted by healthy gains in a select group of high-profile names, remained in positive territory throughout and reached a 52-week intraday high of 4,246.55 in the process, as it proceeded to a closing gain of 17 points. But the Dow could not overcome notable weakness in the shares of International Business Machines (IBM - Free IBM Stock Report), as that computer giant posted solid results on the bottom line, but missed on the revenue side. The market's reaction was swift and harsh, as that stock, the weakest component on the blue chip index last year, fell more than three percent on the day, putting sufficient pressure on the Dow to keep it in the red over the balance of the session, after the initial buying flurry. By the close, that index of 30 blue chip issues had shed 41 points. 

Overall, though, it was a decent day, with many more stocks gaining than losing on the Big Board and the NASDAQ, while both the mid- and small-cap indexes, specifically the S&P Mid-Cap 400 and the small-cap Russell 2000, also did well posting healthy increases of more than a half a percentage point each. Essentially, the stock market moved on earnings. With the majority of concerns either meeting or exceeding their targets, stocks are continuing to hold their own. Where there have been disappointments, such as we saw in the aforementioned case of IBM, as well as from the recently restructured drug provider Abbott Labs (ABT), the reaction has been swift and painful, with the latter issue also selling off in the latest session, too.    

On the whole, we continue to sense that the stock market is overextended, but we also note that many have considered this to be the case for some time now, and yet valuations and equity prices continue to climb. Moreover, with the economy on the mend, with earnings still rising in most cases, with inflation low and unlikely to increase anytime soon, and with competition from fixed-income instruments still in the future, there are simply few places, other than stocks, to put one's money. The recent memory of the real estate bust of half a decade ago also is keeping that option off of the table for many investors. So, stocks keep rising for the most part and worries continue to increase, even as traders chase the market. 

As to the day ahead, after a relative absence of economic news since last Friday, we should be getting a key housing report within the next hour, specifically, data on sales of existing homes for December. Expectations are that the annualized rate of transactions rose from November's 4.90 million homes sold to 4.95 million in the latest month. Sales have stayed brisk, even as mortgage rates have crept up from the lows established more than a year ago. We think 2014 will be another good year for this recovering market, which remains well off the asset bubble days of 2006 and 2007. We also expect to get the latest survey on the leading indicators to be issued at that same time.

Finally, there is the stock market in the hours to come to consider. Here, following yesterday's generally constructive session, we saw prices ease in Asia overnight, apparently on news of weaker manufacturing data in China, while in Europe, the equity buyers are also shying away from stocks thus far today. And over here, the futures are suggesting a weaker opening when trading gets under way in less than an hour from now, with the S&P 500 Index futures now off by five points and the NASDAQ futures down by almost eight points. Bond yields, though, are lower, in response to the weaker data in China. However, the materials issues here are indicating another weaker start. On the whole, though, we sense that earnings will again be the principal driver of the market in the hours to come, as we still are almost a week away from the next FOMC meeting. - Harvey S. Katz    

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