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After The Close - It was a rather ho-hum day on Wall Street, which has been largely the norm thus far in 2012 after an initial one-day surge to start the new year. There could be a few things at play right now in the market. Our sense is that investors may be hesitant to add significantly to their positions, even with the recent string of supportive U.S. economic data, given the continued financial crisis in the euro zone and the resultant weaker euro. It is worth noting that the yield on the 10-year Treasury note, which moves in the positive direction to the price, fell seven basis points, to finish at 1.90%. The bond market may be benefiting from investors taking a wait-and-see approach with regards to equities ahead of any more news on the euro-zone problems.

By the closing bell, the Dow Jones Industrial Average was able to work its way back toward the neutral line, losing just 13 points after spending most of the day more deeply in the red. The S&P 500 Index was relatively unchanged for session sitting at roughly 1,292, as it faces some significant overhead technical resistance in the 1,300 to 1,310 range. Meanwhile, the NASDAQ, which was the best performer of the group for much of the day, was able to shake off Microsoft’s (MSFT – Free Microsoft Stock Report) warning that personal computer shipments may be weaker than expected to finish the session up by eight points. Among the best performing NASDAQ stocks today were YRC Worldwide (YRCW), Human Genome (HGSI), and Crocs (CROX).

As noted, investors received some more encouraging news on the U.S. economy with the release of the Federal Reserve’s latest Beige Book summation this afternoon. The Fed said that the final weeks of 2011 were the strongest stretch for the economy since it appeared to be slipping toward recession late last spring. The lead bank noted that consumer spending picked up in most regions, reflecting gains in holiday retail sales. (Note: December monthly retail sales figures are due out tomorrow morning.) It also noted that manufacturing activity expanded in nearly every Federal Reserve District, with the exception of Atlanta. This is not surprisingly given the positive ISM manufacturing data of late. Another encouraging sign is that inflationary pressures remained very much in check during the final stages of 2011. The only disappointing commentary was that housing remained weak, but even data in that troubled sector have painted a slightly brighter picture in recent months. All in all, it has a fairly positive view of the domestic economy.

Meanwhile, the same can’t be said for the situation overseas. The financial crisis in the euro zone remains front and center, with financial leaders continuing discussions on how to tackle the sovereign-debt crisis and support a staggering euro—the currency was off against the U.S. dollar once again today. As we noted in our earlier market commentary, negative comments from a leading ratings agency did little to help lift confidence on the Continent. Investors are sure to keep an eye on the results of government bond auctions on tap tomorrow. The major European bourses all finished the latest session in negative territory. Our sense is the weakness overseas had a lot to do with the choppy session on these shores, as well.

Elsewhere, earnings season is under way, but given that year-end earnings come out a little later than normal, there was not been much to talk about yet. The next major earnings news comes this Friday when banking giant JPMorgan Chase (JPM – Free JPMorgan Stock Report) releases before the market opens. Investors are likely to focus on that report as prevailing thoughts are that investment income at the major financial institutions weakened during the final three months of 2011. – William G. Ferguson

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


 

12:30 PM ET - The U.S. stock market is taking a breather today, as a weak session in Europe has likely dampened sentiment over here. Britain’s FTSE-100 surrendered about 0.7%, with more modest losses on Germany’s DAX and France’s CAC-40. Traders are still concerned about the ongoing financial problems in the region. Recently, negative comments from a leading ratings agency did little to help lift confidence. The euro is off further today at 1.27. In addition to a weaker economic outlook for Europe, as a whole, better figures for the United States are likely giving the dollar a boost.

As we pass the noon hour in New York, the market is still mixed. The Dow Jones Industrial Average is off 39 points (-0.3%); the S&P 500 Index is shedding two points (-0.2%); but the NASDAQ, which is looking to move into positive territory, is up three points (0.1%). The market’s breadth meantime, is just slightly negative. Overall, declining issues are beating advancers by a narrow margin on the NYSE.  A mixed tone can also be seen in the various market sectors. There are modest advances in the technology stocks, with semiconductor issues holding up well. The basic materials stocks are also doing well, as some of the aluminum names are recovering. There is considerable weakness in the energy stocks, owing to the sharp drop in crude oil prices. Oil is down almost 1% today, pulling back to $101 a barrel. The move may have to do with a weaker economic outlook for Europe, as well as concerns about rising crude inventories.

Technically, the S&P 500 Index may be hitting a bit of resistance as it tries to move past the highs reached in late October.  Notably, volumes have improved, and suggest that investors have been accumulating stocks.

The market should get some support from the earnings season, which has just kicked off. Reports have been light today.  Shares of SUPERVALU (SVU) are sinking, after the company posted weaker- than-expected earnings and reduced its outlook. In footwear, Crox (CROX) stock is up sharply, after the company raised its guidance.  In home building, Lennar (LEN) is seeing its stock rise after the company posted its results. Notably, we have seen homebuilders doing a bit better lately, supported by improved housing metrics. The S&P Home Builders Index (XHB) is up over 1% today, after rising sharply in the past few weeks.

 The economic news has also been minimal. Traders are likely awaiting the Fed’s Beige Book summation for January, which is due out this afternoon. – Adam Rosner

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

 

 

Before The Bell - The bull is still in charge, it would appear, as the new year has started out with a bang, with green arrows practically across the board. Optimism about the state of the U.S. economy, some sense that things may yet work out in Europe, although that situation is still fraught with danger and uncertainty, and a belief that earnings season, now under way will be decent, if not memorable, are combining to take the bears down thus far.
 
Specifically, the reports that we have seen thus far, including data on manufacturing activity, non-manufacturing activity, and employment all tell a positive story. For example, the manufacturing and non-manufacturing, or services, sectors are both expanding further, while job growth has stepped up another notch with the creation of 200,000 new payrolls in December. At the same time, the jobless rate has fallen to 8.5%, and new unemployment claims are still falling. Meantime, looking ahead, we will get a look at retail sales for the all-important holiday season tomorrow, as the government will provide a look at December store and Internet volume. A gain of 0.2% is the expectation. That would match the November result. Then, on Friday, the Commerce Department will put out data on the international trade imbalance. A deficit of $44.5 billion for November is the consensus forecast. In October, the gap was $43.5 billion.
 
Elsewhere, world markets are following our lead, as they are rising across the globe on hopes the U.S. business expansion will gain further traction in the months to come. The reasoning goes that a better U.S. economic performance should help corporate earnings over here and take off some of the stress generated by Europe's debt crisis.
 
The big metric so far in 2012 has, of course, been the December payroll report, which showed not only an increase of 200,000 new jobs, which was better than expected, but, as noted, a further decline in the jobless rate from 8.7% to 8.5%. Expectations had been that these numbers would have come in at 150,000 and 8.7%, respectively.
 
Meanwhile, things are less rosy in Europe. True, data just issued noted that Germany's economy expanded by 3% in 2011, but this report also indicated that the nation's economy contracted slightly in the final quarter of the just-concluded year. That is especially worrisome as Germany is not only the Continent's largest economy, but also its strongest.
 
As for earnings, aluminum giant Alcoa's (AA – Free Alcoa Stock Report) results, issued after the stock market closed on Monday, kicked off the start of the fourth-quarter profit season, with a loss, but a revenue performance that easily outpaced expectations. The stock firmed up after the release, as optimism fueled by the better sales outcome suggests this economic bellwether could be presaging a better showing by industrial America in 2012 than many have been thinking. A good showing yesterday by fellow Dow component Bank of America (BAC – Free BofA Stock Report) also lent an air of optimism to the market, as the Dow climbed by another 70 points, pushing the year-to-date-gain to 2.0%. The NASDAQ, meantime, is up 3.7% thus far in 2012.
 
This early 2012 optimism, however, is not carrying over to the market this morning, as the U.S. equity futures are off slightly in the pre-market, with the S&P 500 Index futures down by more than three points, with about a half hour to go before the start of the new trading day, and the NASDAQ futures off by four points. After this nominal indicated profit taking, though, the bulls could well resume their climb in the hours to come. – Harvey S. Katz
 
At the time of this article's posting, the author did not hold positions in any of the companies mentioned.