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After The Close - The equity market moved lower this morning, but improved somewhat as the day progressed. At the end of trading, the Dow Jones Industrial Average was ahead about 25 points; the S&P 500 Index was close to breakeven; and the NASDAQ was lower by 14 points. Market breadth showed a mixed session, with winners about even with losers on the NYSE. The major equity groups were divided. The energy stocks and utilities logged solid gains, while the consumer names retreated.

Meanwhile, traders received a batch of uninspiring economic news earlier today. Specifically, housing starts slipped to an annualized rate of 1.092 million units during the month of May. In addition, building permits, which are seen as a leading indicator, also softened during the month. These figures may have caught some investors by surprise, as most analysts had been looking for a better showing. Elsewhere, the University of Michigan released the preliminary consumer sentiment number for the month of June. This months’ figure came in at 94.5, falling shy of the consensus forecast.

Elsewhere, investors received just a few corporate earnings announcements over the past 24 hours. Of note, shares of Finisar (FNSR) moved up nicely, after the networking company delivered a solid report and offered encouraging guidance. Meanwhile, there was some notable M&A news to report. Specifically, Amazon.com (AMZN) has announced that it plans acquire Whole Foods Market (WFM) today. Shares of Whole Foods (WFM) surged in response the announcement.

Technically, the stock market has been holding up relatively well, all things considered. Looking ahead, the second quarter will soon be drawing to a close. As companies report their results, and update their outlook, traders should get a better sense of direction. - 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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12:15 PM EDT - The U.S. equity markets started the day on a down note, extending Thursday’s declines. A good part of the downdraft came in the wake of Amazon.com’s (AMZN) announcement that it would be buying natural and organic grocer Whole Foods Market Inc. (WFM) in an all-cash deal valued at $13.7 billion. While this was good news for shareholders of the latter (which vaulted by more than 25%), owners of other grocery purveyors, such as Kroger (KR), Costco Wholesale (COST), Wal-Mart (WMT Free Wal-Mart Stock Report), and Target (TGT), were hit with immediate losses in the value of their holdings. Most of the declines were in the mid-single-digit range.

On the economic front, housing data for May came in weaker than expected, with new home construction down for a third-straight month. By the numbers, housing starts fell 5.5%, to an annualized rate of 1.09 million units, marking an eight-month low for this closely watched metric. Unsurprisingly, homebuilder stocks took a dip, but declines were largely limited to a percentage point or two. Elsewhere, the University of Michigan’s latest survey on consumer sentiment indicated the biggest dip since last November’s Presidential election.

As we pass the noon hour in New York, the major U.S. indexes were all off their lows from earlier in the morning, and it appeared the bulls were trying to put together a rally. The Dow Jones Industrial Average was down six points, the S&P 500 was down four points, and the tech-laden NASDAQ was off by 24 points. Performance was evenly split among the 10 major sectors. The aforementioned rout in grocer stocks dragged consumer noncyclical issues down by a full percentage point. But a good part of that was offset by energy shares (which gained about three-quarters of a percent) and telecommunication stocks (up about one quarter of a percentage point). 

Taking a quick look at the European markets, the session there was decidedly more upbeat. London’s FTSE and Germany’s DAX were each up around half a percentage point, while France’s CAC-40 edged them both out, rising three-quarters of a percent. – Mario Ferro

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 bears were in command during much of yesterday's session. They were emboldened by Wednesday afternoon's decision by the Federal Reserve to raise the federal funds rate by 25 basis points, to 1.00% to 1.25%. The rate decision did not have much of an effect on trading, as a monetary tightening was anticipated by Wall Street, but commentary by the central bank that it plans to pare its $4.5 trillion balance sheet, beginning later this year, unnerved investors some. This more hawkish stance toward monetary policy is not expected to be market friendly, but the lead bank believes that the economy is strong enough to stand on its own without additional stimulus. The concern is that if the balance sheet is not reduced, it could lead to an asset bubble.

Against this backdrop, the sellers returned, and by yesterday’s the closing bell, the Dow Jones Industrial Average, the NASDAQ, and the S&P 500 Index were 15, 29, and five points lower, respectively. Overall, there was a plurality of losing issues on both the Big Board and the NASDAQ, and most of the major equity groups finished in the red.

Indeed, from a sector perspective there were far more down than up arrows among the 10 major equity groups. The economically sensitive sector felt the wrath of the bears yesterday, with the most pronounced selling taking place in the commodities (i.e., basic materials and energy) sectors. The reaction of the U.S. dollar to the Fed's decision to tighten the monetary reins on Wednesday weighed on the commodities yesterday. Too, a drop in oil prices, which fell to a seven-month low this week, is hurting the oil and gas stocks. Conversely, we saw some buying in the utilities and industrial groups.

Although we got some encouraging news on the economy yesterday, as weekly initial unemployment claims fell in the week ending June 10th, the news for the most part this week has semi-disappointing. Both producer (wholesale) and consumer prices weakened and retail sales fell in May. And, just moments ago, we got the latest data on residential construction. Specifically, the Commerce Department reported that housing starts and building permits, two indicators of future construction activity, fell in May, on both a sequential and year-over-year basis.

Meantime, with second-quarter earnings season about a month away from beginning in earnest, the investment community will continue to take its cue from the U.S. economy, the Federal Reserve, and the political scene in Washington D.C. With less than an hour to go before the commencement of trading this morning, the equity futures are indicating a mixed opening for the U.S. stock market. Overseas, the main indexes in Asia finished mixed overnight, while the major European bourses are trading modestly higher as trading moves into the second half of the session on the Continent. Right now it is too early to predict whether the bulls or the bears will have the advantage stateside. Investors should note that trading volume tends to be light on Fridays when the weather heats up outside (summer begins next week), which may lead to a pickup in volatility. Too, it is the third Friday of the month, when option contracts are set to expire, another event that could lead to some late-session movement. Stay tuned.   - William G. Ferguson

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