After The Bell - The U.S. equity markets took a bit of a breather today following yesterday’s big gains—the strongest single-session surge in nearly seven weeks. It appeared that investors were unwilling to make another round of big commitments to equities ahead of the commencement of third-quarter earnings season, which kicked off minutes ago with the release of results from aluminum giant and Dow-30 member Alcoa (AA - Free Alcoa Stock Report). We also believe that some of the indecisiveness may have been due to news that one euro-zone member, Slovakia, had yet to sign off on a plan to strengthen the rescue fund for Greece, as well as the lack of any major news on the U.S. economy today. By the closing bell, the Dow Jones Industrial Average was just modestly in the red; the S&P 500 Index was essentially unchanged; and the tech-heavy NASDAQ, which was notably stronger for most of the session, finished 17 points higher.

The news from overseas, as noted, centered on Slovakia’s hesitation to sign off on a measure to strengthen a European rescue fund. The impasse in Slovakia holds up final approval of a $590 billion euro stability fund, intended to shore up confidence in the ability of euro-zone members to withstand the financial crisis. A vote is expected later in the day. If Slovakia blocks the measure, it could complicate efforts to address Europe's debt problems. Our sense is that the other more powerful European Union members will wield enough clout to get Slovakia on board with the program. Nearly all of the major European bourses, save for a small advance by Germany’s DAX Index, finished the session in the red.  

Meanwhile, there was some merger and acquisition news from the corporate world. We learned, for example, that discount retailer 99 Cents Only Stores (NDN) has agreed to be acquired by affiliates of the investment firms Ares Management LLC and the Canada Pension Plan Investment Board. The deal, which values the retailer at $22 per share, must be approved by 99 Cents Only shareholders. Conversely, car-rental company Dollar Thrifty Automotive Group (DTG) has taken down for the for sale sign after failing to get any acceptable takeover proposals from Hertz (HTZ) or anybody else.

It was a light day and thus far this week for economic news. But that will change with tomorrow’s release of minutes from the Federal Reserve’s two-day meeting on September 21st and 22nd.  At that meeting, the Federal Open Market Committee (FOMC) unveiled its latest bond buying program dubbed “Operation Twist,” which proved to be a major headwind for stock markets upon its release. The minutes are likely to provide more insight into the Fed’s decision-making process. It is possible that the report could spark volatile trading in the currency markets.

Later this evening, the Senate will vote on President Barack Obama $447 billion jobs bill. The measure is expected to go down to defeat on Capitol Hill, largely because of Republican opposition to stimulus spending and a new tax on millionaires. Earlier today, President Obama said that he is prepared to break his bill up into separate parts and move it that way if Congress doesn't pass it in its entirety.

Elsewhere, it was a pretty good day for those long commodities. The price of oil pressed forward on the New York Mercantile Exchange. But the biggest advances were recorded by agricultural commodities. Contracts for corn, oats, rice, and soybeans were all up sharply. Conversely, metals futures were weaker and trading of soft commodities was mixed. The weakness of the U.S. dollar, particularly against the euro may have aided commodities this afternoon—a weaker greenback makes commodities more attractively priced in overseas markets, spurring demand for such products. - William G. Ferguson

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



12:30 PM ET - Stocks are mixed today, after a rally of mammoth proportions yesterday. Meanwhile, traders continue to react to the ever-changing developments in the protracted European debt crisis. More recently, leaders in Europe have been awaiting a vote by the Slovakian Parliament, which holds the last vote needed to expand the rescue fund. The small country has been widely divided on the issue. Meantime, the markets were also rattled by troubling remarks from the ECB President Trichet, suggesting that the crisis is widening. Comments by other officials, indicating that Greek bondholders will have to absorb larger losses did not help the situation, either. On the Continent, the markets had a directionless session. The FTSE-100 and the CAC-40 finished in negative territory. However, the German DAX was able close with a minimal gain.

Economic news has been minimal so far today. Traders may get a bit more direction when the minutes from the FOMC’s September meeting are released this afternoon. In addition to providing insight into the newly implemented “Operation Twist” the report will also shed light on Ben Bernanke’s assessment of the nation’s economy.

Corporate news has been light today. Shares of Sally Beauty Holdings (SBH) are trading lower, as that company has launched a large share offering. Also, shares of Russian steelmaker Mechel (MTL) are off slightly, after that company posted its quarterly results. More important, will be the larger company reports. Alcoa (AA - Free Alcoa Stock Report) is set to release results after the close. This report is considered a bellwether by some, and will not go unnoticed.

At roughly noon in New York, the market is trading with slight gains. The Dow Jones Industrial Average is up five points (0.05%); the S&P 500 Index is up two points (0.19%); and the NASDAQ is adding on 16 points (0.63%). Market breadth is mixed, as advancers are even with decliners on the NYSE. Many of the market sectors are trading lower. However, there is some strength in the capital goods and the technology names. Stocks advancing on heavy volume include: Bigband Networks (BBND), 99 Cents Only (NDN), and AMR Corp. (AMR). Stocks heading lower include: Netflix (NFLX), Riverbed (RVBD), and Infosys (INFY).

Technically speaking, the S&P 500 index closed above its 50-day moving average yesterday.  Notably, this is the first time that this index has closed above this level since August. This is a bullish sign, at least to the technicians, and may signal that the index is at an inflection point. It will be essential that the market maintains some upward momentum at this point, and volumes pick up. - Adam Rosner

At the time of this article's writing, the author had a position in Alcoa (AA).


Before The Opening Bell - It continues to be all about Europe. In fact, that Continent, which had been the scene of so many upheavals during the past century, is back at it again, albeit somewhat less dramatically than at times in the past. The impetus for the latest European drama, which is being played out in financial markets around the world on a daily basis, is the fate of Greece and the euro-zone banking sector.
Specifically, the 20-nation euro zone is seeking to meet and hammer out a viable accord that could prevent a disorderly default by debt-encumbered Greece that could set off shock waves among other troubled euro-zone members including Ireland, Portugal, and two materially larger economies in Spain and Italy. Up until the past week, most of the euro-zone-induced global action had been to the downside, and much of it was dramatic, as the problems in that struggling area had helped to drive the Standard and Poor's 500 Index very briefly into bear market territory. The definition of that event, according to Wall Street lore, is a correction of 20%, or more. We had briefly hit that mark last Tuesday morning.
However, since that brush with the bear, we have come back dramatically. Indeed, in that short span of time, the bulls have erased some 40% of the aforementioned bear market setback, orchestrating several dramatic moves to the upside, including yesterday's 330-point surge in the Dow Jones Industrial Average and accompanying 87-point runup in the tech-heavy NASDAQ.
In all, the Standard and Poor's 500 Index, which had been as high as 1,370.58 on an intraday basis in the past year, and as low as 1,074.77 last Tuesday, now sits at 1,194.89. We hesitate to claim that we are back in a bull market, as we are getting only a hint of concerted action to possibly come in the euro zone, rather than some definitive moves that have been actually put into place. Even so, following a weekend of meetings between the respective heads of France and Germany, Nicolas Sarkozy and Angela Merkel, the bulls are feeling a lot better about things.
In truth, there have been other reasons for the recent decline in the market and the subsequent comeback over the past week. For one thing, there has been the ever-present risk, over the past few months, that our nation could be back at the edge of a recession--just two years after shaking off the last one. Weak data on housing, employment, and consumer incomes and confidence have all played a role here. Then, there has been the unease over the pending start of earnings season, which is always an unnerving event--the more so this time given the spate of profit warnings issued over the past few weeks. Our sense continues to be that Corporate America will largely make its numbers, but that the degree of the outperformance will not be what it had been in most prior quarters. As for a recession, we had been thinking that the odds of such a setback might be on the order of 50%. Data released over the past week, including better-than-expected results in manufacturing, non-manufacturing, and employment may be reducing those odds a bit--but certainly not eliminating the risk.
As for Europe, concerns this morning that Slovakia might not approve a stronger European bailout fund, which is seen as necessary to beating a path out of the ailing Continent's financial crisis, is weighing on markets around the world this morning, and casting a modest cloud over our futures. This action suggests that after a scintillating day yesterday that we might head a bit lower at the start of trading this morning. Our sense, however, is that the recently triumphant bulls may be difficult to keep down for any length of time, so a later upturn cannot be ruled out. Besides Europe, what we would be looking for is the start of earnings season, which will begin later this afternoon with aluminum giant and Dow component Alcoa's (AA - Free Alcoa Stock Report) third-quarter income statement. Expectations are that this metals concern will have tallied net of $0.23 a share in the period. We also would be looking for guidance from Alcoa and from JPMorgan Chase (JPM - Free JPMorgan Stock Report), when that banking giant and fellow Dow concern reports its results on Thursday. - Harvey S. Katz
At the time of this report's writing, the author did not have positions in any of the companies mentioned.