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After the Close - Those investors’ long equities experienced some highs and lows during this week’s five-day stretch on Wall Street. The week started off with some selective buying pushing the major equity indexes higher, with the large-cap dominated Dow Jones Industrial Average and the S&P 500 Index hitting all-time highs. However, the bulls were unable to hold their ground and the sellers returned, emboldened by some uninspiring economic news both here and abroad and a few notable earnings misses stateside, most notably from mass merchandiser and Dow-30 component Wal-Mart Stores (WMT Free Wal-Mart Stock Report). The biggest damage was done yesterday, with the aforementioned Dow Jones Industrials reversing course and leading the market lower. Then, today it was looking like a rather directionless day for the major averages—the Dow crossed the unchanged line 64 times—before the buyers returned late in the session to push the indexes higher. All told, it was a mixed week for Wall Street: the Dow finished lower; the S&P 500 Index was relatively unchanged; and the NASDAQ managed a small gain.

From a sector perspective, it was nearly all up arrows for the top-10 sectors, with the only exception being the basic materials issues. Of note, the more economically sensitive groups, including the financials and industrial stocks, which were out of favor for most of the day, along with the technology names, before rallying in the final 90 minutes of trading. Meantime, the gains for the defensive groups, including the utilities, consumer staples, and telecommunications stocks, were even more impressive. We think that the recent drop in the yields on fixed-income securities is making the higher-yielding equities in those areas more attractive to investors. Plus, those groups provide some safety in a market where valuations are stretched. (The S&P 500 Volatility Index, or VIX, finished the week just above 12, a level that clearly suggests that the equity market is overbought.) Thus, adding some safety to a portfolio may not be a bad way for some investors to go.

Meanwhile, we did receive an encouraging report on a very important sector of the U.S. economy before the commencement of trading today. Specifically, the Commerce Department reported that housing starts and building permits for the month of April were up sharply, with respective month-to-month advances of 13.2% and 8.0%. That report was needed after weaker-than-expected data earlier in the week on industrial production and retail sales. The market was also spooked yesterday by data showing that first-quarter economic growth in the euro zone was slower than anticipated. So, indeed, the U.S. homebuilding data was constructive for the equity market today, including the shares of the major homebuilders.

Looking ahead to next week, we would not be overly surprised if volatility were to pick up again. Our thinking here is that with earnings and economic news on the light side during the first few days, it could create a bit of a vacuum to trading, which, with market valuations frothy these days, could prompt some selective selling. In the very least, we expect to see some more sector rotation in play. We would also be remiss if we did not warn investors that the market can become a bit tricky when there are no real trends in play, which appears to be the case right now. On the economic front, the housing industry will remain in focus, with data on existing and new home sales coming toward the end of the week. We will also get the minutes from the latest Federal Open Market Committee meeting on Wednesday. Meantime, the first-quarter earnings news is tapering out, but we will still get a number of reports from the retailers, including Home Depot (HD Free Home Deport Stock Report), Staples (SPLS), Lowe’s Companies (LOW), and The Gap (GPS), Former Dow-30 component and computer giant Hewlett-Packard (HPQ) is also scheduled to report its latest quarterly results. – 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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12:30 PM EDT - The U.S. stock market got off to a weak start this morning, but has managed to reverse direction to some degree. At just past noon in New York, the Dow Jones Industrial Average is up three points; the broader S&P 500 Index is flat; and the NASDAQ is off nine points. However, there is some underlying support for equities today, as advancing issues are slightly ahead of decliners on the NYSE. Further, some of the market sectors are showing improvement. Strength can be seen in the consumer stocks. The utilities also continue to attract buyers. Meanwhile, there is weakness in the basic materials group. The healthcare names are off, too.

Technically, stocks have pullback over the past few days, which is not surprising, given the volatility we have been seeing lately. The S&P 500 Index is now back to its 50-day moving average, located at 1,868. Hopefully, this level will provide some support for equities. Many traders have noted that the market has become quite fragmented. For one, the NASDAQ has lagged the other major averages, and that is troubling. Further, the number of stocks making new highs has declined lately, and that suggests that market, as a whole, may be weaker than the major averages indicate. For instance, the small cap issues, as measured by the Russell 2000, have been declining, with that index near correction territory, while the S&P 500 Index has moved higher. The same holds true to a lesser extent for the mid-cap stocks. So, while the market is holding up, we currently lack broader participation.

Meanwhile, traders received a few economic reports this morning. The housing markets seem to be making progress. Specifically, housing starts rose to 1.072 million units, annualized, in April, which was better than had been expected. Monthly building permits also showed improvement. Elsewhere, the consumer may be turning a bit cautious. The University of Michigan’s Consumer Sentiment Index came in with a preliminary reading of 81.8 for May; some had anticipated a stronger showing.

Finally, there were a few earnings reports released today. Shares of Applied Materials (AMAT) are trading higher, after the technology company put out good results. JC Penny (JCP) stocks is up, too, as the retailer’s report pleased investors. - 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 – First-quarter earnings season is largely in the books, but April-period results, many of which are from retailers with fiscal years that end in January, are starting to flow in. The biggest surprise came from struggling department store operator J.C. Penney (JCP), which delivered better-than-expected sales figures and a narrower-than-anticipated loss. JCP stock is soaring ahead of the bell, in response. The same is true for shares of high-end retailer Nordstrom (JWN), which are also up sharply on earnings news. Investors took kindly to April-quarter results from a third department store operator, Dillard’s (DDS),as well as Applied Materials (AMAT), a producer of semiconductor wafer fabrication equipment, and those stocks are indicating slightly higher openings this morning.

There was also good news on the M&A front, as cloud computing company Rackspace Hosting (RAX) has hired investment bank Morgan Stanley (MS) to help it explore strategic alternatives after being approached by several suitors recently. RAX stock is surging in the premarket, in response.

It was not all good news, however, and shares of World Wrestling Entertainment (WWE) are poised to lose nearly half their value when trading commences this morning, after the company inked a television deal with NBCUniversal. Investors were clearly upset with the pact, which raises questions about the success of the professional wrestling league’s relatively new Internet-based WWE Network. – Matthew E. Spencer

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 elevated volatility in the stock market continues. First, equities soared on Monday. Then, they stabilized on Tuesday, with the Dow Jones Industrial Average still managing to hit yet one more all-time record high. They followed that slight dip with a more ferocious selloff on Wednesday, and then hit the skids further yesterday. Much of the blame for the latest pullback, meanwhile, lies at the doorstep of the economy, where some key recent business metrics have been rather disconcerting after a welcome period of upward adjustment, which had followed the dour winter experience.

On point, as noted, the latest session saw the market backtrack, with these latest losses being largely put into place by a succession of dour issuances over the past several days. Individually, such reports did not merit much attention, for example, the listless 0.1% increase in April retail sales, which had been reported on Tuesday morning. However, when combined with news of a sharp decline in both industrial production and factory utilization last month and a falloff in homebuilder sentiment, there was simply too much dour data to ignore. Couple all of that with fears of stalling growth in the euro zone and reports showing somewhat higher inflation on our shores and some investors opted to sell.

Thus, after a weak opening yesterday and some further follow-through on the downside during the middle portion of the trading day, the market ended the session with rather sizable losses for a second straight session running, although the final numbers did show some snapback from the nadir of the session. All told, by the close, the Dow Industrials were off by 167 points; at their worst they were lower by more than 215 points. The Standard and Poor's 500 index was lower by 18 points and the NASDAQ was off by 31 points, about half its session low. The Russell 2000, meantime, which fell by just seven points, is now off by 9.6% from its high or the past year. Thus, we are just about at a correction level; in fact, we had been there on an intraday basis.

In addition to the economic concerns at home and abroad, there were also some earnings reports to digest. Of note here, was a disappointing showing by retailing behemoth and Dow-30 component Wal-Mart Stores (WMT - Free Wal Mart Stock Report). That unprepossessing bottom-line result prompted some selling in this blue chip, keeping the range-bound issue right in the middle of its 52-week price band. On the other hand, networking behemoth and fellow Dow-30 component Cisco Systems (CSCO - Free Cisco Stock Report) turned in somewhat better results and suggested that brighter days might be ahead. That was all this blue chip needed to tally a notable gain on the day. Elsewhere, another high-profile retailer Kohl's (KSS) failed to overwhelm investors with its most recent quarter's results, and that stocks pulled back some.

However, it was the economy that was front and center for the bears yesterday, and not just on our shores, as the data out of Europe was clearly underwhelming. Of note, the situation is again sufficiently worrisome that Germany is suggesting that more monetary stimulus could be forthcoming. This suggestion has likely grown out of the report showing that euro-zone GDP gain just 0.2% in the first quarter, which was half the expected increase. Then, there is Ukraine and other matters concerning Russia. The tense situation in that part of the world has been quieter the past few days, but we are not yet out of the woods on that count.

As to other news, stocks were notably lower in Asia overnight, most likely taking their cue from the selloff on our shores. Weakness was especially pronounced in Japan, where the Nikkei threatened to go below the 14,000 level. Meanwhile, in Europe so far this morning, the principal equity markets are moving downward, led lower by a further plunge in the Portugal equity market.

Finally, there is our market. Here, one thing in our favor at this time, and which is likely to preclude a deep and protracted selloff is the fact that long-term interest rates are again backing off, with the yield on the benchmark 10-year Treasury note falling yesterday to 2.50%. The companion 30-year Treasury bond, meantime, is down to 3.34%. It seems that nervous investors are back in there buying fixed-income vehicles, thereby shunning risk. That said, such low yields are hardly competition for U.S. stocks, as so many good-quality equity names are yielding 3%, 4%, and 5%, with well-protected dividends and the opportunity for capital gains, as well. As to individual equities, recently weak Rackspace Hosting (RAX) shares are surging this morning, as the cloud services provider has hired MorganStanley (MS) to look into strategic alternatives, including an acquisition of Rackspace. Even so, after yesterday's marked pullback, our futures are suggesting a slightly lower opening for Wall Street when trading resumes this morning. - Harvey S. Katz

At the time of this article's writing, the author had positions in CSCO.