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After The Close - There was clearly no Monday-Tuesday reversal today for the U.S. equity market, which has been a common theme this year. Indeed, the selling intensified on Wall Street as the day progressed, with the large-cap issues following the lead of their small-cap brethren, which fell sharply yesterday and continued their decent in the latest session. We think there were a few reasons for the pullback in the equity indexes, some of which entered the week at all-time highs. Investors have shown a bit of apprehension ahead of the kickoff of the second-quarter earnings season, which began after the close of trading today with the latest results from aluminum maker Alcoa (AA). Too, some disconcerting economic data from the Continent has spooked investors. Overall, declining issues led advancers by a notable margin once again on the Big Board and the NASDAQ. The spread was around four to one in favor of the decliners on the NASDAQ for the second consecutive session.

As noted, the selling was more encompassing than yesterday, which was primarily small-cap driven. The Dow Jones Industrial Average, the NASDAQ, and the broader S&P 500 Index were all notably lower at the close, but off of their earlier lows. In fact, the NASDAQ, which has performed very well after a sluggish start to 2014, finished lower on consecutive days for the first time in more than a month. The primary culprit were the technology stocks, which were led lower by a number of the industry heavyweights, including shares of Google (GOOG), Amazon.com (AMZN), and Twitter (TWTR). Within the Dow 30, all but three stocks—Procter & Gamble (PG - Free P&G Stock Report), Exxon Mobil (XOM - Free Exxon Mobil Stock Report), and Wal-Mart Stores (WMT - Free Wal-Mart Stock Report)—finished in negative territory.

Speaking of technology, it was the biggest laggard today among the top-10 sectors. Still, it had plenty of company in the red, with notable losses recorded in the healthcare, consumer discretionary, and telecommunications sectors. The only group that managed to buck the trend was the utilities. The utilities benefited from the increased desire for safety today and the drop in the yields on fixed-income securities, which makes them more attractive than bonds for investors stressing income. That is not to say that bonds were not in demand, as the yield on the 10-year Treasury note, which moves in the opposite to the price, fell six basis points today. Not surprisingly, the S&P 500 Volatility Index (or VIX), which is also known as the “fear gauge,” rose again today after jumping by more than 10% yesterday.

In addition to some trepidation ahead of earnings season, the equity markets both here and abroad, were hurt by some disconcerting economic data from Europe. Specifically, Germany has issued a trio of disappointing economic reports since late last week. Then today, investors learned that manufacturing output in the United Kingdom fell by an unexpected 1.3% in May, the biggest decline since January, 2013. The recent disquieting data from Europe has unnerved investors over here, who are concerned that the economic slowdown on the Continent could hurt the U.S. economy and some of the larger economies in Asia. Germany’s industrial production decline of 1.8% in May has had the biggest negative impact on trading the last few sessions. – William 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 PM EDT - The U.S. stock market opened lower this morning, and so far, has been unable to meaningfully reverse course. At just past noon in New York, the Dow Jones Industrial Average is down 139 points; the broader S&P 500 Index is off 17 points; and the NASDAQ is shedding a notable 75 points. Market breadth is decidedly unfavorable, with declining stocks outweighing advancers by about two to one on the NYSE. These statistics affirm even weaker conditions on the NASDAQ. Notably, there are considerable losses in the technology sector. Also, the healthcare issues are losing ground, led lower by the biotechnology names. In contrast, the utilities, which often serve as a safe haven during turbulent times, are advancing today, if slightly. Some real-estate related issues are seeing buying, too, possibly for similar reasons. Further, investors are gobbling up the 10-year Treasury note, which is also a defensive move.

Stocks are pulling back today after staging a healthy advance last week. While it is hard to pinpoint the definitive reason for this, some traders may be looking to lock in profits before second-quarter earnings season gets under way. Others may be looking to reduce their equity exposure, just in case the upcoming corporate reports fail to impress Wall Street. The mood has definitely turned more cautious today, as the VIX, a sentiment measure, is up almost 10%, to 12.43.

Elsewhere, traders received no major economic reports this morning. This lack of information probably has not helped matters. Too, it is likely worth noting, that the economic news out of Europe was discouraging earlier today, and the major bourses put in a weak session. This may have set the stage for the pullback we are now seeing in the U.S. equity markets. Tomorrow afternoon, the FOMC releases the minutes from its June meeting. That will be an item to keep an eye on.

Once again, there were few important corporate earnings reports released this morning. However, Alcoa (AA) will be putting out its figures after the market closes today. - Adam Rosner

At the time of this article’s writing, the author had a position in Alcoa.

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Stocks to Watch from The SurveySecond-quarter earnings season gets under way after the market closes today, when aluminum maker Alcoa (AA) is scheduled to release June-period results. Corporate news is rather light ahead of that announcement, however. Canada-based pharmacy chain Jean Coutu Group (PJC.A.TO) has released May-period financials, but the stock appears to be little changed ahead of the bell. Elsewhere, precision instruments company KLA-Tencor (KLCA) has increased its quarterly cash dividend by $0.05, to $0.50 a share, and announced a $1 billion share-repurchase authorization. – 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 bulls came marching triumphantly into yesterday's session following a strong holiday shortened week on Wall Street, and they immediately ran into at least a temporary roadblock--with a markedly weaker showing for the small- and mid-cap stocks than for the market, in general. This was not a complete rout, to be sure, but the day did have a notable weakness to it, as profit taking spurred on by weakness in Europe, brought about by a disappointing report on industrial output in Germany, got the day off poorly. A lack of possibly offsetting economic news on our shores further took the measure of those perennial Wall Street optimists. The bulls can only now hope for a Monday-Tuesday reversal (more below).

Specifically, it was a dull day, in which the Dow Jones Industrial Average moved lower to start things out and never varied too much from there, holding in a comparatively narrow range throughout the session. The other large-cap averages also shed some ground, with somewhat more pronounced softness in the tech-laden NASDAQ than the Standard and Poor's 500 Index. However, it was in the S&P Mid-cap 400 Index and especially in the small-cap Russell 2000 that the really story unfolded, with the latter index plunging at one point by roughly 1.8%--a material setback.

By sector, all of the major groups were lower for much of the session, led into the minus column by the energy, health care, and basic materials sectors, with particular weakness in the downtrodden coal stocks. However, the utilities did relatively well, while we saw some small gains in the larger telecommunications stocks. Overall, though, there were many more losing issues than winning stocks on the Big Board. The NASDAQ, meantime, made an even worse showing. Absent a definitive story or two to explain this aggregate weakness, we would assume it was a case of some overdue profit taking as well as a little angst ahead of the start of second-quarter earnings reporting season, which will kick off after the close today when aluminum maker Alcoa (AA) reports its results. Expectations here are somewhat high given the strong showing by this stock of late. 

Also, there was a paucity of takeover news and rumors yesterday. Merger Monday, so to speak, has been a staple of the market in recent weeks, and that plethora of stories has helped to underpin a somewhat frothy equity market. Also, there may have been some reappraisal of last Thursday's employment report. Although that issuance was very upbeat and illustrated rather definitively that the economy is on the mend following the long and arduous winter, that very strength could be signaling that the Federal Reserve may step up the expected date--now believed by many to be the second half of 2015--of its initial effort at some monetary tightening. 

All told, the Dow fell by 44 points; the S&P 500 Index gave back almost eight points; and the NASDAQ tumbled 34 points. But, as noted, the news was far worse outside the large-cap universe, with the Russell 2000 shedding a disconcerting 21 points, or 1.8%. Clearly, there was some shunning of risk, at least for one day.

Now, looking out to a new day, we find that stocks were mixed in Asia overnight, while equities are tracking somewhat lower in Europe thus far this morning. The problems in that region now involve Germany, the Continent's largest economic factor. To wit, data issued earlier today on the trade front proved disquieting. That weaker metric followed by one day a dour report on industrial production and by several days a disappointing issuance on manufacturing orders. The concern is that if Germany's economy slows, what would that mean for the rest of the region, where recent fortunes have been materially weaker.

As to our market, the early indications are softer, with the Dow, the S&P 500, and the NASDAQ futures all modestly lower with less than an hour to go before the start of the new trading day. Once more, the day will be sparse in terms of economic releases, which may explain some of the focus off shore. In fact, save for weekly jobless claims data this Thursday and the release of the Federal Reserve minutes tomorrow afternoon, the week will be similarly short on economic news. Finally, gold prices are pushing up once more, while oil prices are dipping a bit. - Harvey S. Katz   

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