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After The Close -  The U.S. equity market was able to shake off a weak start to the trading day that was prompted by a disconcerting report early this morning on the euro zone’s economy. Indeed, one hour into the new trading week, early losses were recouped and the market did not look back from that point—though there was a spate of selling in the last half hour of the first trading day of the new quarter. By the closing bell, the Dow Jones Industrial Average, the NASDAQ, and the S&P 500 Index had added 52, 28, and 11 points, respectively. The latest moderate buying spree on Wall Street was all encompassing, with each of the 12 major sectors finishing in positive territory. Also, advancing issues outnumbered decliners by a sizable margin on both the Big Board and the NASDAQ. 

As noted, the U.S. equity market was initially under pressure, owing to data showing that manufacturing activity in the euro zone had contracted for the eighth consecutive month. Even more troubling was that the slowdown in the region’s smaller nations in the south has spread to the largest economies, particularly those of Germany and France. An economic downturn in the euro zone will also make it harder for the 17-nation federation to overcome its debt crisis, as it will depress tax revenues and hurt consumer spending. As we stand now, all signs point to a recession on the Continent, if it is not already officially in one. Despite, this news, the major European bourses finished well above the neutral line today, with advances of 1.6% and 1.1% for Germany’s DAX and France’s CAC-40, respectively.

Indeed, investors—helped by some good economic data from the United States and China—easily shook off the European report. On these shores, the Institute for Supply Management said manufacturing activity had firmed up to a reading of 53.4 in the latest month, beating both the February figure and the consensus expectation. Overall, the March reading made it 34 months in a row that manufacturing had expanded in this country. Meanwhile, China's Purchasing Managers' Index has hit an 11-month high.

Not surprisingly, stocks in those sectors most closely tied to the health of the global economy moved higher following the good reports from the world’s two largest economies. Leadership was shown by the basic materials, energy, consumer noncyclical, transportation, and financial sectors. It was also a good day for most of the Dow-30 stocks. However, the one notable decliner were the shares of Home Depot (HD - Free Home Depot Stock Report). A Commerce Department report issued this morning showing that construction spending fell 1.1% in March may have had something to do with the weakness in Home Depot shares today.     

Looking ahead, our sense is that the economy will remain the focus of investors during this holiday shortened week. Later on, for example, we get the Institute for Supply Management’s companion report on non-manufacturing activity, along with reports on the U.S. employment and unemployment situation. The consensus expectation is that the results of these reports will not disappoint and may even prompt some more buying in a market that is clearly overbought right now.   - 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 ET - The U.S. stock market opened lower this morning, on downbeat European manufacturing data, but has since recovered strongly. Indeed, all the major averages are making strides. As we pass the noon hour, the Dow Jones Industrial Average is up 60 points (0.5%); the S&P 500 Index is ahead by 10 points (0.7%); and the NASDAQ is adding on 22 points (0.7%). There is a positive bias to today’s session, as advancers are ahead of decliners by 3-to-1 on the NYSE. Moreover, all of the major market sectors are now participating in the move up. There is impressive leadership in the basic materials sector, thanks to a bounce in the miners. Notably, the badly battered coal issues are having a good day. The energy stocks are also doing well, thanks to strength in the exploration and production names. Gains in these sectors likely reflect a generally good day in the commodity markets. The price of crude oil is up about 1% to $104 a barrel. Gold, another widely watched commodity, is also higher. In contrast, there is some relative weakness in the conglomerates and the services sector.

Importantly, the markets here in the U.S. largely shrugged off the aforementioned mixed news overseas, where a number of downbeat manufacturing figures were released recently. For the most part, the PMI figures for the greater European region matched expectations. Better-than-expected readings in Germany and the U.K. helped offset weakness in France. The European markets are just closing out a choppy session. Britain’s FTSE-100 had a good day, up over 2%. In the end, losses were reversed on Germany’s DAX, and France’s CAC-40, as well. 

The global markets probably got a boost, after traders got a look at the PMI figures for the United States. According to the Institute of Supply Management, the manufacturing index reached 53.4 in March. This was a bit ahead of analyst expectations, as well as better than February’s 52.4 reading. Traders more or less looked past a report showing construction spending slipping in February. Tomorrow, we get a look at the factory orders for February, as well as auto and truck sales data. The release of the minutes from the Fed’s latest meeting will also take place in the early afternoon. 

In corporate news, shares of Groupon (GRPN) are slipping, after the company restated its recent quarterly results. Avon Products (AVP) is seeing its stock traded higher, after Coty made a bid for the cosmetics giant. It seems Avon has rejected the bid, hoping for a higher price, however. - Adam Rosner

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

 

Stocks to Watch from The Survey – Shares of Avon Products (AVP) are up sharply in premarket trading on news that the toiletries/cosmetics company received (though subsequently rejected) a $10 billion takeover bid from rival Coty Inc. The offer price of $23.25 a share in cash represented a 20% premium to Avon’s closing price on Friday.

Global Payments (GPN), the credit card processor whose shares fell sharply on Friday after it reported a security breach, was removed from Visa’s (V) list of compliant service providers over the weekend. Additionally, Global Payments announced quarterly financial results this morning. – 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 - A new quarter will shortly begin on Wall Street following one of the best three-month performances in years. All told, the Dow Jones Industrial Average added just over 8% in the opening period; the Standard and Poor's 500 Index jumped 12.0%; while the tech-heavy NASDAQ and the larger-cap NASDAQ 100 climbed by 18.7% and 21.0%, respectively. 

All told, it was optimism that the euro-zone's still-sizable ills had been somewhat exaggerated, that the U.S. economy would continue to press moderately and consistently forward in the coming months; and relief that earnings in this country would likely continue to climb this year that helped invigorate the bulls, in our opinion. 

Indeed, so positive was sentiment that a key gauge of investor psychology, the VIX volatility index, fell further to near a 52-week low, ending the three months at 15.50. The 12-month range has been 13.66 to 48.00. A reading below 20 is generally considered to be an indication of an overbought market and one ripe for some profit taking. Our sense is that the U.S. equity market is, indeed, quite overbought and also frothy on a short-term basis, and thus vulnerable to even the slightest hint of disappointment on either the economic or the corporate profit fronts.

Meanwhile, as to the new quarter, indications are that it may start out on a nominally softer note in the stock market this morning, as a manufacturing survey in the euro zone issued earlier this morning showed that this gauge of industrial activity had fallen to a 47.7 reading in March, down from 49.0 in February. A reading below 50.0 in the euro zone, just as in this country, is consistent with a shrinking manufacturing base. Also, unemployment has risen to nearly 11% in that region, suggesting further that the Continent is in recession. In fact, even in France, the second largest economy and presumably one of the stronger nations in Europe, after Germany, saw its manufacturing gauge contract to a reading of just 46.7 last month.

Now, we are less than an hour away from the release of a key manufacturing survey in our own country. Here, this metric has signaled an expansion in manufacturing and economic activity in general for nearly three years. And we expect this gauge of activity to again give off a positive signal. Specifically, in February, that measure of industrial output came in at 52.4. Consensus expectations have that measure coming in at 53.0 for March. Today's manufacturing survey will then be followed by a report on construction activity this morning. Then, tomorrow, we are scheduled to get data on factory orders and auto sales. On Wednesday, the same trade group that will bring today's report on manufacturing, will weigh in with nonmanufacturing data. Here, as well, some improvement is forecast. Finally, while the equity markets will be closed on Friday in observance of Good Friday, the government will issue its monthly employment report that day, with expectations being that non-farm payrolls will have increased by 210,000 last month, down slightly from February's 227,000 job increase. At the same time, unemployment is forecast to have stayed level at 8.3% last month.

Thus, even while Europe struggles, our economy seems as though it will continue to press forward. Will Europe have an effect on this country? It is too soon to tell, although our sense is that we probably can handle a mild recession in the euro zone without much fallout here. As for stocks as we begin a new quarter, they are, as noted, down modestly in Europe this morning, but have now largely pared their early losses in this country suggesting that just a slightly lower opening is ahead in about a half hour from now.

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