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After The Close - Stocks weakened in afternoon trading, finishing sharply lower and at session lows. At the close, Dow Jones Industrial Average was off 381 points; the S&P 500 lost 30 points; and the NASDAQ shed 57 points. Declining issues outpaced winners on both the Big Board and the NASDAQ.

The Dow Jones Industrials were up as much as 166 points early on, but the mid-morning report of a build in oil inventories and a weak energy sector seemed to take some steam out of investor enthusiasm. Some month-end selling also appeared to be a factor.

The market once again turned volatile after a sharp reversal yesterday. The previous day’s losses were sparked by comments before Congress by newly minted Federal Reserve Chair Jay Powell to the effect that there was a chance that the economy could overheat, given recent fiscal stimulus in the form of tax reductions. That caused a selloff on the thinking there was an increased likelihood of more aggressive monetary policy tightening by the Fed to combat the threat of rising inflation.

This morning’s in-line revision to fourth-quarter GDP data, as well as some peripheral business reports, did provide reassurance that the economy was not necessarily expanding rapidly enough to believe that interest rates might be on the verge of taking off. That was evidenced by a decline in the yield of the benchmark 10-year Treasury note to under 2.87% from 2.91% on Tuesday. Bond yields move in the opposite direction to prices.

Nevertheless, it is fair to say that the bull market has reached a new stage following generally clear sailing inspired by years of easy-money policies. Higher interest rates clearly are now providing some resistance to stock prices. The Dow, the S&P, and the NASDAQ all saw multi-month winning streaks come to an end today following big declines at the beginning of February, when fears of higher inflation and interest rates came to the forefront. Share prices have recovered somewhat, but not fully, in the past few weeks.

Competition from higher rates suggests gains from stocks will be harder won in the coming months although, given prospects for strong earnings advances, share prices can still forge ahead.

Among individual names, shares of TJX Companies (TJX) jumped after the off-price retailer posted encouraging sales. Similarly, the stock of Booking Holdings (PCLN), the former Priceline, enjoyed a good session after the company reported strong bookings. - Robert Mitkowski

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

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Before The Bell - The second month of 2018 will come to an end today, and what a 28-day span it was for the stock market. Indeed, after marching through January with nary a hiccup, the Street saw a dramatic pullback early this month, which sent both the Dow Jones Industrial Average and the S&P 500 Index into correction mode, with cumulative drops of more than 10%. However, true to form whenever there has been a setback during this long upward climb for equities, a recovery has quickly ensued. This time would be no different, as the market quickly turned around, ultimately retracing much of that aforementioned selloff.    

Behind the market's resilience continues to be formidable economic improvement. And for the most part, this strength is continuing, with today seeing the release of the February survey on consumer confidence from the Conference Board. In that issuance, the data showed a reading of 130.8 for the month. Not only was that up nicely from January (124.3), it also was the best reading since a score of 132.6 in November of 2000. On the other hand, data issued a bit earlier in the morning showed that durable goods orders sank 3.7% last month.

Meanwhile, the market – following back-to-back big wins on Friday and Monday, in which the Dow climbed by better than 700 points, started the latest session on an up note, with that composite quickly rising by close to 100 points. But that strength was short-lived, as new Federal Reserve Chair Jerome Powell suggested that the bank could raise interest rates four times this year should economic and inflation data continue to gain. Once his testimony was digested, the market's strength quickly faded, so that as the afternoon began, the Dow was off by close to 80 points, while the NASDAQ was really selling off, losing some 50 points.          

The market was not only shaken by Powell's testimony before Congress, which included confidence that inflation was moving up to target, but also by a major setback in shares of Walt Disney (DIS Free Walt Disney Stock Report). The entertainment behemoth saw its stock move lower by some 5% for the day. On the other hand, shares of Macy's (M) rose on news of strong holiday earnings. Other brick-and-mortar stores saw their shares rose as well yesterday. For the most part, though, equities continued to struggle into the early afternoon, with the market's deficit climbing to some 150 points just past noon. 

Stocks then went back and forth, although remaining in the loss column throughout the afternoon, with the Dow going down past the 100-point marker on several occasions, before rebounding to near an unchanged reading subsequently. The other composites moved in similar patterns, as remerging fears of higher interest rates following Chair Powell's Congressional testimony lingered for the remainder of the session. In fact, his somewhat hawkish remarks led to some unloading of Treasuries, with the 10-year note's yield jumping to 2.91% in the late afternoon. Earlier in the day, the rate had briefly fallen below 2.85%.

Things then deteriorated into the close, with the Dow's loss topping 300 points late in the afternoon, as any buying attempts dried up. In all, it was a major selloff brought on by the hawkish rate sentiments coming from the new Fed Chair. At the close, all 10 of the major equity groups were lower, led down the losing path by the consumer cyclical sector, while losing stocks led winning issues on the Big Board by some three to one. All told, the Dow's final loss was 299 points, while deficits of 35 points and 91 points were racked up by the S&P 500 Index and the NASDAQ, respectively.

Now, the month of February concludes, as for some hint of pending action stateside, we look across the globe to Asia where in overnight dealings, the key indexes were moving lower. Stocks are now down in Europe this morning. In other markets, oil is trading pennies a barrel lower in New York, while yields on the 10-year Treasury note are at 2.90% so far today following yesterday's aforementioned 2.91% close. As to our stock market, the futures are so far trending modestly higher. - Harvey S. Katz, CFA

At the time of this article’s writing, the author held positions in one or more of the companies mentioned.