After The Close - It has been a rollercoaster ride for investors over the last fortnight. Today was no different as the major U.S. equity indexes initially rallied off of last week’s difficult final two trading days. It appeared to be a case of some bargain hunting on Wall Street, with the bulls helped by some encouraging economic and earnings news (see below). However, around the midday hour on the East Coast, a good deal of the wind in the sails of the market averages began to dissipate after reports surfaced that a Russian jet buzzed by a U.S. warship several times in the Black Sea on Saturday even after stiff warnings from the U.S. News of that event seemed to elevate the concerns about the geopolitical tensions in Ukraine—and the riskier stocks, particularly those on the NASDAQ and the Russell 2000, sold off before regaining their equilibrium in the final half hour and making another push higher into the close.

The market volatility was not overly surprising, as trading volume was light throughout the session, which can lead to pronounced swings in trading and that certainly seemed to be the case late in the day. At the close, the NASDAQ, S&P 500 Index, and the Russell 2000, which had given back all of the earlier gains and then some, managed to regroup and finish in the black. The Dow Jones Industrial Average, which did not slip into the red at any point during the afternoon, firmed up again and finished 146 points higher on the day.

From a sector perspective, it was mostly a productive day for the top-10 groups. On the plus side, leadership came from the basic materials, consumer staples, and energy, which were able to hold a good portion of their earlier gains. The same could not be said for the healthcare stocks, which weakened notably in the afternoon before staging a rally to escape the red ink. Interest in the technology and the biotech stocks picked up late, but investors should note that the conviction behind the buying in the latter areas was far from convincing enough to make one believe that a rally is forthcoming in that sector. The financial stocks, which were initially helped by better-than-expected earnings news from Citigroup (C), turned negative at one point before rallying like the broader market in the final 30 minutes of trading. It should be noted that several financial giants, including Dow-30 member Goldman Sachs (GS - Free Goldman Sachs Stock Report), are scheduled to report their quarterly results this week. Once again, the stock of JPMorgan Chase (JPM - Free JPMorgan Chase Stock Report) was lower, as investors are still showing disappointment over the banking giant’s weaker-than-expected quarterly results last Friday.  The performance of the financial stocks will be closely watched over the next several days, as any attempt by the bulls to regain control of trading will be made even more difficult if the financials were to falter.

As noted, we received some more good news on the U.S. economy before the market opened on our shores. Specifically, the Commerce Department reported that retail sales rose 1.1% in March, handily beating the consensus expectation. It also marked the biggest percentage gain since September 2012. This report was an encouraging snapshot of the U.S. economy, as the consumer accounts for roughly two-thirds of the nation’s economic output. On Wednesday, we will get three more important reports on the health of the U.S. economy with data due on housing starts and industrial production, as well as the Federal Reserve’s Beige Book summation of current economic conditions.

Meantime, we did get some earnings news today. In addition to the aforementioned positive report from Citigroup, we learned that WebMD (WBMD) significantly boosted its first-quarter and full-year guidance and the stock jumped on the news. Investors should note that we did not receive any results from Dow-30 members today, but that will change with nine Dow components scheduled to report their latest quarterly results over the next three days. - William G. Ferguson

At the time this article was written, the author did not have positions in any of the companies mentioned.


12:00 PM EDT - Stocks are rallying today after the release of the best retail sales data since September 2012. Right around noontime on the East Coast, the Dow Jones Industrial Average is up 134 points and the NASDAQ is in the plus column by 47 points. Market breadth confirms the bullish trend, with the number of advancing issues easily outpacing decliners on both the Big Board and the NASDAQ.

Wall Street is attempting to recover from its worst losses in two years, after high-flying momentum technology and biotechnology stocks fell of their own weight last week. Helping matters greatly this morning was data that showed U.S. consumers are doing their part to help the economy. Investors greeted the news warmly, since the consumer accounts for by far the greatest part of domestic GDP.

Providing an assist to sentiment was favorable news on the earnings front from banking giant Citigroup (C), which reported better than expected profits as a result of lower provisioning for loan losses and reduced administrative expenses. Citi’s upside surprise partly made up for the disappointment recently experienced when the bank failed to get its capital plan approved by the Federal Reserve, essentially taking dividend growth and share repurchases off the table.

On the whole, though, the earnings season at hand isn’t shaping up as all that inspiring. That was probably one reason investors decided to take some profits last week.

In general, trading conditions to date in 2014 have not been as forgiving as last year, which saw 30%-plus gains on several important indexes. Poor weather sapped economic growth during the winter months; the Federal Reserve is providing less liquidity by tapering its innovative bond-buying program; and a replay of Cold War tensions over the fate of Ukraine has created uncertainty.

The latest news on the civil strife in Ukraine is word that the nation’s acting president is not opposed to a referendum that would allow regions contemplating secession greater autonomy. If carried out, the suggestion might defuse the rising potential for armed conflict.

Nevertheless, the increasing strains within Ukraine’s borders could yet provide Wall Street with a reason to turn the recent selloff in stocks into a full-blown correction, particularly if earnings season were to disappoint.

In other markets, oil and gold are trading modestly higher, but government bond prices are a shade lower, following the strong retail sales figures. - Robert Mitkowski

At the time this article was written, the author did not have positions in any of the companies mentioned.


Stocks to Watch from The Survey The earnings calendar is light this morning, with the exception of Citigroup (C), one of the nation’s largest banks. The company delivered better-than-expected first-quarter results, and the stock is up moderately ahead of the bell, as a result. Elsewhere, shares of Edwards Lifesciences (EW) are up sharply in the premarket, after the medical supplies company received a favorable ruling in a patent litigation suit. Specifically, a preliminary injunction was handed down, limiting the sale of a rival product made by industry peer Medtronic (MDT), whose stock is indicating a notably lower opening this morning. – 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, which had suffered a sizable down leg over the past fortnight, fell further this past Friday and in so doing, saw a pair of key averages move ever close to an official correction, which is defined as a 10% pullback.

True, we are not anywhere near such a pullback in the Dow Jones Industrial Average, which even with Friday's 143 point setback, is off just 3.6% from its all-time high reached earlier this year. Also, the Standard & Poor's 500 Index is down just 4.3%, after having suffered a 17 point drop in the latest session. But the same cannot be said for the tech-laden NASDAQ, which following Friday's 54-point drop is now off 8.5%, or within striking distance of a correction. The same story now prevails on the small-cap Russell 2000 Composite, which lost another 16 points to end the week and is now off 8.3% from peak to trough.

Distressingly, this latest selloff came in spite of the releases of a pair of upbeat economic reports. To wit, the Labor Department reported, at 8:30 AM (EDT) that the Producer Price Index (PPI) had increased by 0.5% in March--fully five times the nominal 0.1% gain that had been forecast for the month. Also, the core PPI, which backs out the volatile food and energy components, jumped by 0.6%; an increase of just 0.2% had been the forecast. Now, in most times, such a large increase in either category would have been worrisome. However, with inflation still well below the Fed's 2% target, on average, this pickup in pricing pressures can be viewed as good news for the central bank.

Then, about an hour later, the University of Michigan issued an upbeat reading on Consumer Sentiment, signaling that confidence in the economy was picking up notably. Normally, such constructive back-to-back reports would have given a boost to the market. And, in fact, those issuances did help to moderate the early pullback in the market. Indeed, by late morning, the Dow had pared a one-time triple-digit loss to less than 50 points, while the NASDAQ had even managed to tick into the plus column for a brief spell. But this half-hearted rally could not hold, and soon the sellers were back at it, and by early afternoon, we were pushing to the session's lows, with the Dow at one point off by 155 points and the NASDAQ down by more than 62 points, or 1.5%.

But just when it appeared as though the trap door had been opened and a further collapse was in the offing, the selling did not mushroom into anything akin to Thursday's rout. Still, the latest setback merits more than just a passing glance, and we seemingly are now heading relentlessly toward a market correction--at least on a selective basis. Worries about earnings, as first-quarter profit reporting season gets going; concerns about valuations, especially in the high-growth, high volatility sectors, such as technology and biotech; fears about a possible further deterioration in our fractious relations with Russia; and lingering uncertainties about Federal Reserve monetary policies are all keeping the buyers at bay.

Meanwhile, we are now set for another week, and following the latest setback on our shores on Friday, the market can look forward to a very busy week. On point, we have just received data on retail sales, while the rest of the week will feature data on consumer prices, industrial production and factory use, housing starts and building permits, weekly jobless claims, and the leading indicators. Also, the Federal Reserve will be out with its latest Beige Book summation on the economy, while peak first-quarter profit reporting season will be upon us, with about a third of the Dow-30 companies set to issue their latest metrics.

As for the markets, the selloff in New York late last week is doing nothing for global confidence as we being a new week. Thus, the markets in Asia were generally lower overnight. Moreover, they are faltering in Europe thus far this morning. Over here, however, after a moderately lower start to the U.S. futures, these indicators of upcoming market activity now are signaling a little bargain hunting when the market opens for trading in about an hour from now. Influences on the rest of the day will be the results from March retail sales, which just came out and showed a gain of 1.1%, the biggest rise since September of 2012. The consensus view had been for an increase of 0.8%. - Harvey S. Katz  

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