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After The Close - A bearish week on Wall Street concluded on a positive note. The Dow Jones Industrial Average, the S&P 500 Index, and the NASDAQ all finished higher, with buying picking up modestly in the final hour. Our sense is that some semi-encouraging news from the nation’s Capitol regarding the looming “fiscal cliff” negotiations (more below) offset an economic report showing that industrial production fell 0.4% in October. Still, despite today’s positive performance for equities, the three aforementioned indexes were down 1.8%, 1.4%, and 1.8%, respectively, in the latest five-day stretch. 

As noted, the news that had the biggest effect on equities today came from Capitol Hill. Congressional leaders said publicly that they should have confidence that they will be able to reach a deal with newly re-elected President Obama to avoid a likely economically constraining combination of tax increases and spending cuts scheduled to kick in on January 2, 2013. Senate Majority Leader Harry Reid also went as far as to say that he is confident a deal can be reached well ahead of the deadline. This rare show of unity among the political parties raised hopes that a compromise can be reached—and at least for the moment stemmed the losses in the U.S. equity markets, which at times have been quite substantial over the past 10 days, or so.

It was also a busy 24 hours on the earnings front, with some notable reports coming from the technology and retail sectors. Of note was a dour release from Dell (DELL). Shares of the computer company fell to a three-year low on lower-than-expected earnings and revenues amid a declining PC market. The stock of Applied Materials (AMAT) was also weaker after the tech company lowered its near-term outlook. But there was some good news in the technology area today, as Autodesk (ADSK) topped earnings expectations. In the retailing sector, the stocks of the Gap (GPS) and Foot Locker (FL) were higher after both provided the Street with some encouraging third-quarter results. Overall, nine of the 10 major sectors finished in the black today, with the only exception being a minuscule setback for the telecommunication group.

Still, there was continued demand for safe-haven instruments, as investors are still very concerned about the euro zone’s sovereign-debt problems and the looming negotiations to avoid the aforementioned “fiscal cliff” scenario on these shores. On the equity side, the defensive-oriented healthcare, utilities, and consumer noncyclical sectors showed some leadership today, while demand for bonds continued to pick up. In fact, the yield on the 10-year Treasury note, which moves in the opposite direction to the price, finished the week at 1.57%, its lowest level since the last day of August.  

Elsewhere, the European bourses were down sharply, with a good deal of selling taking place in the final few hours. Investors were unnerved by reports that suggested German Chancellor Angela Merkel wants the European Central Bank to limit bond buys from highly indebted states. Ms. Merkel believes the Outright Monetary Transactions program should only be used in emergency cases. Such commentary also indicates that Europe’s financial leaders are still not closing in on a definitive plan to help the euro zone’s ailing nations.

Looking ahead, next week will be an abbreviated one for investors, with the market closed on Thursday for Thanksgiving. The shortened week does bring the final earnings report for the Dow-30 members, with struggling computer giant Hewlett Packard (HPQ - Free Hewlett Packard Stock Report) scheduled to report its latest quarterly results on Tuesday. On the economic front, the housing market will grab the attention of Wall Street, with data due on existing home sales (Monday) and housing starts (Tuesday). A report on the leading economic indicators comes on Wednesday. That said, we expect the lion’s share of the investment community’s focus to remain on the “fiscal cliff” news and the European debt problems.   - 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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12:20 PM EST - The U.S. stock market started out weak this morning, but then made a sharp move into positive territory. At just past noon in New York, the Dow Jones Industrial Average is up 30 points (0.2%); the S&P 500 Index is up four points (0.3%); and the tech-heavy NASDAQ is slightly positive. Market breadth suggests a mixed tone to the session, as gainers are just ahead of decliners on the NYSE, bit off slightly on the NASDAQ. Some market sectors, such as the utilities and consumer stocks, are advancing, while there is weakness in the technology and basic materials issues.

Technically, the S&P 500 Index has shown little strength lately. In fact, over the past eight days, the Index has declined almost every day, except for a couple of sessions in which it managed to just hold on to a neutral, or slightly positive reading.  The index is now firmly below its 200-day moving average, located at about 1,380, and it may well be close to testing the 1,300 area. Meanwhile, traders do not seem too concerned about the earlier down move, as the VIX is still at about 18. However, sentiment can change quickly on Wall Street, especially if the market starts to break through some widely watched levels.

Now that the third-quarter earnings season is largely over, and the election has also passed, investors are likely looking ahead to see just how the “fiscal cliff” situation is resolved in upcoming meetings. Given the somewhat fragile economic recovery and high unemployment levels, higher taxes may not do much to help matters. Further, investors are likely worried that a protracted government debate, similar to what ensued during the past debt-ceiling drama, may further add to the worries. Today’s sudden reversal may be in response to some positive news surrounding this important issue.

The economic news was not too supportive today. According to the Federal Reserve, industrial production slipped 0.4% in October, which was far more than many had expected. This reading also stands in contrast to the slight increase in production logged in September. Meanwhile, factory utilization also ticked down a bit during the month. 

The corporate news was mixed, as has been the case lately.  Specifically, computer-maker Dell (DELL) saw its stock slip on weaker-than-expected sales and earnings. In retail, Sears (SHLD) stock also fell on disappointing results. However, not all the news was bad, as shares of the GAP (GPS) are up on a favorable report and outlook.   - 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 Retailers remain in the limelight today, with several companies, including broadline retailer Sears Holdings (SHLD), reporting results for their most recent quarters. Sears posted a wider year-over-year loss in the third quarter, sending its shares notably lower in the premarket. Foot Locker (FL), the athletic wear and shoe retailer, reported results that were above expectations. That stock is moving a bit higher in early morning trading. Meanwhile, clothing retailer Gap (GPS) missed earnings consensus estimates for its third-quarter. But, its rosier full-year outlook is sending its shares higher this morning.

In other earnings news, computer giant Dell Inc. (DELL) reported third-quarter results that seemed to leave investors wanting, as its shares are off marginally in the premarket.

Meantime, Penn Nat’l Gaming (PENN), an operator of gaming and pari-mutuel properties, announced plans to split into two publicly traded companies, one a gaming-based REIT, and the other a gaming operator. The stock is up sharply in early morning trading. – Kathryn M. Drew

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 - Another day, another decline. That old refrain could well be the rallying cry for the bears on Wall Street these days, as once again yesterday, the sellers took over the reins and rode the market to another session loss.

To be sure, the latest decline, which featured a loss of 29 points in the Dow Jones Industrial Average and setbacks of two and eight points, respectively, in the Standard and Poor's 500 Index and the NASDAQ, was actually somewhat worse than the modest softness in the averages would suggest. That is because there were more than twice as many losers on the Big Board as winners yesterday, while the plurality of declining issues to rising stocks on the NASDAQ was better than three-to-two. A peak at the mutual fund tables this morning would further underscore the aggregate weakness in the stock market yesterday.

Actually, for a time, it looked as though there would be a meltdown, such as we have seen in some recent afternoons. Thus, after the market opened nicely higher yesterday, with the Dow at one point gaining some 30 points, the averages fell into the loss column by 11AM (EST). A brief rally attempt around 2PM proved short lived, but then a subsequent selloff in the next 90 minutes drove that index of 30 blue chip companies into the minus column by some 75 points. At that point, a full-scale retreat looked likely. However, some half-hearted buying by bargain hunters pared the losses somewhat by the close of the day.

Once again, it was the twin fears of an imploding financial mess in Europe and worries that our own nation might face daunting economic problems if the fiscal cliff of mandated tax increases and spending cuts were to take hold at yearend in the absence of a compromise between the Congress and the White House. Add in a flare up of violence in the habitually strife-torn Middle East and the market seemed likely to descend further. As noted, though, when the Dow fell just below 12,500 the buyers came in, just as they did when the S&P 500 Index briefly dipped below 1,350.

Meanwhile, the economic backdrop did not do much to calm the jitters. True, the Consumer Price Index detailed that there was no near-term inflation problem in our country, thereby affirming what the companion Producer Price Index had noted the day before. However, initial jobless claims spiked up for the week ended November 10th. Such a jump, to a 19-month high of 439,000, would have normally caused the market to swoon, we think. However, much of that 78,000 gain from the week before can be explained away by the impact of Hurricane Sandy. Indeed, that was the biggest one-week increase since September, 2005, when Hurricane Katrina devastated the Gulf region. Also disconcerting were negative manufacturing readings in both New York State and the greater Philadelphia area. Those metrics, too, may have been affected by the devastating storm of late October. We could also see some of the storm's effect on another data issuance a bit later this morning. That report, on October industrial production, will be issued within moments from now.

Finally, there is the day ahead, where following an early and rather sharp selloff in the futures, the bargain hunters are now out in some force. And with about a half hour to go before the start of the new trading day, the S&P futures are up more than three points and the NASDAQ futures are ahead by some eight points. So, we could see some nice early strength, assuming the industrial production and accompanying factory use data are as benign as most economists expect.   - Harvey S. Katz

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