After The Close - Investors came back down to earth today as last week’s euphoria regarding the Federal Reserve’s initiation of another bond-buying program faded.

In truth, some observers had hoped the Fed would stay on the sidelines, since that would have indicated the economy and employment situation were healing on their own. Many local bankers, for instance, feel that there is enough liquidity to go around, and that more bond purchases won’t stimulate loan demand. A continuation of the central bank’s zero-interest rate policy for a few more years could create distortions in the financial system and push lenders to take more risk, as well.

Nevertheless, the Fed felt the need to press on, since its aggressive monetary policy is helping the all-important housing industry, and unemployment remains high.

But, at least for today, the Federal Reserve’s moves couldn’t lift the market. At the close, the Dow Jones Industrial Average was down 40 points and the NASDAQ was off five points. There were more than two times as many issues falling than rising on the New York Stock Exchange although, with the major averages near multi-year highs, the number of stocks hitting fresh 52-week highs still easily outstripped those falling to new lows.

The day’s lone economic report didn’t help matters. A manufacturing survey conducted by the New York Federal Reserve showed a surprisingly sharp drop in the region for September, when a flat showing had been expected. A moderate decline had been recorded in August. This data carries some weight, since it provides the first look at the health of the nation’s manufacturing sector this month. On Thursday, the Philadelphia Fed’s manufacturing index is expected to show slightly less bearish conditions.

Among the market’s sectors, materials and consumer cyclical stocks felt more profit taking than most. Defensive sectors, such as consumer staples and healthcare, performed relatively well, though.

Tomorrow brings an earnings report from FedEx (FDX). The package-delivery giant has already signaled that it expects to post lower profits for its August fiscal quarter. More important for investors will be the company’s indications as to how current conditions are shaping up. The earnings release is due out prior to the opening bell on Tuesday, and could affect trading in the shares, as well as the overall market, since FedEx’s results are seen as an indicator of the broader business environment.    
At the time this article was written, the author did not have a position in any of the companies mentioned. 


12:00 PM ET - Profit taking appears to be the order of the day across the global markets, as we approach the midday hour of trading in New York.

Last week’s announcement that the Federal Reserve was set to embark on its third round of quantitative easing gave a solid boost to equities around the world. This time around, the central bank has elected to spend $40 billion a month buying up mortgage backed securities in an effort to boost economic growth and help ease unemployment. The announcement helped lift the major U.S. equity indexes to near multi-year highs.

Now, with a new week underway, and with a number of traders off celebrating the Jewish New Year, stocks have eased up a bit in the first few hours of trading on these shores. The Dow Jones Industrial Average, the NASDAQ Composite, and the S&P 500 Index all opened lower today and are now almost uniformly showing modest losses of less than half a percentage point.

European stocks have followed a similar pattern. In addition to the Fed’s announcement, overseas equities got a boost earlier last week when a German constitutional court gave the go-ahead for the Continent’s rescue fund. After closing at 15-month highs on Friday, European equities have since retreated a bit, with London’s FTSE 100, Germany’s DAX, and France’s CAC 40, all showing modest declines as their respective trading sessions wind down.

With little in the way of economic data due out this week (other than some housing data on Wednesday), market traders here and abroad will likely be taking most of their cues from news events over the next few days.   - Mario Ferro

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


Stocks to Watch from The Survey Corporate news appears to be a rather light today and trading volumes could be a bit lower, as some investors take a break from the markets to celebrate Rosh Hashanah. However, there are a few stocks to keep an eye on. Technology behemoth Apple (AAPL) said that preorders for its new smartphone, iPhone 5, topped 2 million in the first 24 hours it was available, making it the fastest selling iPhone to date. Apple stock is up modestly in pre-market trading. In other news, the world’s second-largest home-improvement retailer, Lowe’s (LOW), has ended its roughly $1.8 billion bid to acquire Canada-based rival Rona. Finally, industrial conglomerate Tyco International (TYC) has received shareholder approval to spin off its North American ADT and flow control businesses. Management also updated fourth-quarter guidance. The stock is trading slightly higher in the premarket. – Matthew E. Spencer  

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


Before The Bell -The new trading week begins with most of the major equity indexes within a stone’s throw of their 52-week highs. Last week, the Dow Jones Industrial Average, the NASDAQ Composite, and the broader S&P 500 Index rose 2.2%, 1.5%, and 1.9%, respectively, helped by word that the Federal Reserve plans to buy roughly $40 billion of bonds per month in an attempt to lower lending rates and jumpstart a rather uninspiring domestic economy. Germany’s Constitutional Court’s decision to uphold the European Union’s European Stability Mechanism, which is designed to tackle the euro zone’s troublesome debt crisis, also prompted investors to pump more money into the world equity markets.

The recent accumulation of stocks appears to have left the world equity markets, including our own, overbought at this moment. In fact, the S&P 500 Volatility Index (or VIX) begins the new week at 14.51. Any reading south of 20 suggests that buying of stocks may be overheated, and the stock market could be susceptible to a sharp correction if news were to disappoint. Overnight, trading in Asia brought out the buyers, with China’s Hang Seng index finishing the latest session in positive territory. However, so far today in Europe, investors appear to be taking some profits after last week’s gains.

We would not be surprised if investors on these shores took their cues from what is going on overseas, at least for the next few days, especially with a number of traders taking the next few days off in observance of the Jewish New Year. It is also worth noting that both earnings and economic news will be rather light over the next five days, though many investors will await a few important reports on the housing industry on Wednesday. On the middle day of the trading week, we will receive data on housing starts and existing home sales. The only other notable economic release this week is data on the leading economic indications due on Thursday. With the economic news light and third-quarter earnings season still several weeks away from commencing, QE3 and the tidings from the euro zone will remain on the minds of investors.

Meantime, the price of oil is down a bit this morning after a sharp ascent over the last fortnight. Driving crude prices higher in recent weeks (oil finished above $100 a barrel on the New York Mercantile Exchange last Friday) are concerns over the fractious Middle East region. Just this morning, thousands of protesters took to the streets of the Afghan capital in the latest of demonstrations against the U.S., while Israeli Prime Minister Benjamin Netanyahu warned the international community that Iran may be in position to produce a nuclear bomb in a matter of just six or seven months. Our sense is that heightened concerns about the stability of this oil-producing region could push crude prices higher in the months ahead.

With less than an hour to go before the commencement of trading on these shores, the futures are pointing to a lower opening for the U.S. equity markets. As noted above, the U.S. equity market is ripe for some profit taking right now and, not surprisingly, some selling at the start of trading appears to be in the cards. 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.