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After The Close - The U.S. equity market took investors on a rollercoaster ride today. The major indexes started the session to the downside, as worries in Europe, particularly about Italy’s economy, weighed on stocks. Then, the averages regrouped by the late morning hours on the East Coast, helped by some encouraging economic news and a few positive earnings reports from Corporate America, before the sellers once again emerged in the afternoon to only give way once more to the buyers in the final hour. At the closing bell, the Dow Jones Industrial Average and the NASDAQ, managed nominal gains, while the S&P 500 Index was flat.

Overall, advancing issues led decliners on both the Big Board and the NASDAQ. But from a sector perspective, it was roughly an even split between up and down arrows among the top-10 groups. The basic materials, consumer staples, and, to a lesser extent, oil stocks were in demand today, while investors were not keen on the telecommunications, healthcare, and utilities issues. The slight drop in the market’s volatility—the S&P 500 Volatility Index (or VIX) fell today—likely had much to do with the drop in those stocks. That said, ...

There still appears to be some nervousness on Wall Street, as investors are concerned about the possibility that the Federal Reserve will raise interest rates ahead of schedule in 2015 and also regarding the escalating geopolitical tensions and fighting in both the Middle East and Ukraine. Both situations could have far-reaching financial impacts, especially the latter, as tensions grow between Russia and the West. The heavy trade sanctions recently placed on Russia by the Unites States and Western Europe are hurting trade relations between Europe and Russia. Too, Russia said it will respond with its own bans against the West. Such dealings are expected to impact many of the world’s largest economies, particularly those of several of euro-zone nations. The world equity markets have reacted negatively to most of the recent news from that region. Investors need not look any further than yesterday’s pronounced late-day selloff for confirmation.

As noted, there was some positive news on the U.S. economy. Specifically, the Commerce Department reported that the U.S. trade deficit fell in June, which may result in an upward revision to the initial 4.0% estimate for second-quarter GDP growth. It also was another sign, along with recent favorable reports on manufacturing and nonmanufacturing activity that the economy should expand by at least 3.0% over the final six months of this year. The trade gap report was the last significant piece of economic news we will receive this week. However, investors should note that tomorrow the European Central Bank (ECB) will conclude its two-day monetary policy meeting. What President Mario Draghi has to say will be closely monitored by equity market participants, as economic growth is starting to wane again in the euro zone. Just this morning, we learned that Italy’s economy—the third largest in the euro zone—fell back into a recession. There are also troubling signs of late for Germany’s economy, which is noteworthy given its importance to the euro zone.

Turning back to the United States, most of the earnings news was positive, which has been the case for much of the fast-concluding earnings season. After the close of trading last night, Walt Disney (DIS - Free Disney Stock Report) beat expectations, but shares of the entertainment giant finished today’s session modestly lower. The big news from the corporate world, though, was the collapse of a few possible merger and acquisitions. Twenty-First Century Fox (FOXA) said that it will no longer pursue a deal with Time Warner (TWX), while Sprint (S) announced that it is no longer considering buying fellow telecommunications company T-Mobile. Meanwhile, reports surfaced today that Dollar General (DG) is considering making an offer for Family Dollar Stores (FDO) that would exceed Dollar Tree’s (DLTR) $8.5 billion offer to buy Family Dollar. And, late this afternoon shares of TIBCO Software (TIBX) temporary halted trading after reports surfaced that the company has approached potential buyers. Shares of the e-commerce company jumped after they resumed trading. - 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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12:25 P.M. EDT - The U.S. stock market opened lower this morning, but quickly managed to reverse direction. It should be noted that the international markets likely set the stage for the weak start here at home. In Europe, the major bourses declined, as traders received some sluggish regional economic data. Too, concerns about the situation in Ukraine persist.

Meanwhile, at just past noon in New York, the major averages are all in positive territory. The Dow Jones Industrial Average is up 46 points; the broader S&P 500 Index is ahead six points; and the NASDAQ is advancing 22 points.  It is also encouraging to see traders buying the smaller names, as the Russell 2,000 Index is pressing nicely higher. Market breadth shows an upward bias, as rising issues are outnumbering decliners on the NYSE. Strength can be found in the basic materials issues, owing to gains in the mining names. The energy sector is also moving higher, thanks to a solid performance by the oil and gas producers. On balance, weakness can be seen in the utilities and in the telecommunications issues.

The stock market has pulled back somewhat over the past week, but the S&P 500 Index is still just about 3% off the high of about 1,990 hit in late July. Hopefully, stocks will firm up from here. However, it is not clear what will act as the catalyst needed to push the market higher, especially now that second-quarter earnings season is coming to a close.

Meanwhile, investors received some constructive economic news today, and that may be helping matters.  Specifically, the nation’s trade gap narrowed to $41.5 billion in June. This reading was quite a bit better than many analysts had anticipated. Tomorrow, the employment situation returns to the spotlight, as we get a look at the initial and continuing jobless claims.

In corporate news, Walgreen (WAG) stock is trading lower after the drugstore operator announced that it will be increasing its investment in Alliance Boots.  Also, shares of Sprint (S) are slipping after that company stated that it will no longer be pursuing a merger with T-Mobile (TMUS). – 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 Media conglomerate Disney (Walt) (DIS - Free Disney Stock Report) is at the head of the earnings docket this morning. However, it is two failed acquisition attempts that are getting all the headlines this morning.

Disney, the Dow-30 component that is the parent company of sports powerhouse ESPN, reported earnings and revenues that bested expectations after the close yesterday. Its shares were up fractionally in premarket trading.

Other high-profile entities that have reported earnings are Ralph Lauren (RL) and Molson Coors Brewing (TAP); the upscale clothing manufacturer beat the consensus call, but that figure was still down from last year’s number for the same period. The shares did not react much early this morning. The beer distributor bested expectations on both the sales and profit lines and its stock is up about 1% thus far today.

With regard to the aforementioned acquisitions falling apart, media powerhouse Twenty-First Century Fox (FOXA) has withdrawn its bid to purchase competitor its Time Warner (TWX). Time Warner also announced mixed results this morning, and when coupled with the breakoff of merger talks, its shares are sharply lower in the premarket.

Additionally, due to stiff opposition from regulators, communications concern Sprint Corp. (S) has decided to end its pursuit of rival T-Mobile US (TMUS). Sprint also announced a change in its CEO position to a wealthy entrepreneur that is unproven in the wireless market. Shares of both providers were trading down early today.

Elsewhere, on the corporate inversion front, pharmacy behemoth Walgreen Co. (WAG) has seen its stock come under pressure this morning after its management announced it will not be moving its headquarters overseas once it completes the purchase of Alliance Boots in the United Kingdom.   - Erik M. Manning

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, after a recuperative day to start out the new week, lapsed into its now-familiar losing pattern again yesterday, as the averages started out the latest session notably to the downside, with the 30-stock Dow Jones Industrial Average sinking some 90 points at the outset of trading. The losses were widespread with many more issues down than up, while the large and small-cap indexes all fell in tandem. It was a disquieting start to a mid-summer morning. 

Then, after a mid-session respite that helped to briefly give the equity market a mixed look, as the losses in some of the averages narrowed materially and the small- and mid-cap indexes (notably the Russell 2000 and the Standard and Poor's Mid-Cap 400) even managed to rise into the plus column for a time, the market's latest downturn intensified once again and did so significantly.

In fact, by early afternoon, the averages were all plunging, as the Dow reached a session low, with a loss of some 200 points. At its worst, the Standard and Poor's 500 Index was off by some 25 points and the tech-laden NASDAQ was lower by 50 points. It was not pretty. In fact, all 10 of the equity groups were sharply lower at the session's nadir, with the advance-decline ratio especially poor, as declining stocks held more than a three-to-one edge on the Big Board. That ratio was not quite as bad on the NASDAQ.

The market then stayed well into the loss column throughout the afternoon, although the worst declines of the day were overcome late in the session, as the averages wound up paring about a third of their losses. In all, the Dow closed off 140 points; the S&P 500 Index was down 19 points; and the NASDAQ was in the minus column to the tune of 31 points. The small-and mid-cap indexes also faltered, although not quite as badly. As before, all 10 of the equity market groups showed red arrows, led lower by the energy and basic materials stocks; the advance-decline line was weak, with the Big Board showing an 11-to-4 lead for declining issues; there were many more new lows than new highs set on both the NYSE and the NASDAQ; and the VIX volatility index rose more than 10% suggesting that risk was now being avoided by many traders.

What turned the market lower on a day, which had seen good economic news in the form of a better-than-expected gain in factory orders for June and non-manufacturing activity for July, was an escalation of tensions in Europe. Specifically, Russia's Prime Minister indicated that he had ordered his government to prepare retaliatory measures against Europe and the United States after their earlier imposition of sanctions against Russia. Fears of new moves by Russia against Ukraine also rattled investors yesterday.

Against this backdrop, the economy at home continues to press forward, suggesting that the 4.0% rate of improvement booked in the second quarter was not an aberration. So, although growth could well moderate from that elevated perch in the current period and in the fourth quarter, the projected 3.0%, or better, pace would still be quite formidable for an advance that has been of more modest proportions, especially when matched up against expansions during the 1970s, 1980s, and 1990s.

Looking forward now, and in the wake of yesterday's afternoon meltdown, the major equity markets were generally lower in Asia overnight, with a loss of 1% in Japan alone, while they are pressing notably lower in Europe so far this morning. The setback on the Continent, which are now pushing them to session lows, evolved not only in response to our market's sharp setback yesterday, but also to news that already struggling Italy had returned to recession. In all, Italy's FTSE MIB equity index is now off some 3%. All told, that nation's GDP declined by 0.2% in the second quarter. A nominal gain had been the forecast. Then, of course, there are the risks from Russia and Ukraine, and that potential further difficulty is also now pressuring our market once again, with the S&P 500 Index futures now in the red by almost seven points, while the NASDAQ futures are lower by 18 points. So, a further retreat would seem likely at the open. 

Finally, in news just issued, the U.S. government reported a significant decline in our nation's trade gap during June, with that key metric showing a deficit of $41.5 billion versus the May shortfall of $44.7 billion. Initially, the May deficit had been calculated at $44.4 billion. The big drop in the trade imbalance was largely the result of petroleum imports falling to their lowest level since late 2010. The sizable decline in our nation's international shortfall, could well have a modestly positive effect on second-quarter GDP growth, which, as noted, came in at a stellar 4.0%. A revision in that figure is due out later this month. We had been looking for some downward revision in GDP growth at that time; now, given the trade gap improvement, that would appear somewhat less likely.   - Harvey S. Katz   

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