After The Close - The U.S. stock market slipped back a bit today, after two days of strong gains. At the close of the session, the Dow Jones Industrial Average was off 99 points (-0.7%); the S&P 500 Index was off by 11 points (-0.8%); and the tech-heavy NASDAQ slipped 10 points (-0.3%). Nonetheless, market breadth indicated that there were some areas of strength, as advancing issues were just about even with decliners on the NYSE. Some of the market sectors traded higher today, with solid leadership in the consumer cyclical, capital goods, and transportation stocks. However, there was some weakness in the conglomerates, healthcare, and basic materials issues.

Technically, the S&P 500 Index pulled back today in an orderly fashion. The consolidation was not that unexpected, as the market, as noted, has logged a couple of days of sizable gains. Yesterday’s up move was accompanied by rather strong trading volume, an indication that traders were committing to the rally. The move up may well continue through the holiday period, but much will depend on the breaking news both in the corporate and political arenas. Some of the weakness today was attributed to investors’ concerns that the nation’s budget deal may still be an area of contention.

The economic news was decent overall today. According to the Department of Commerce, housing starts for November came in at 861,000 units, annualized, which was a bit lower than many had expected, but well ahead of a year earlier.  On a brighter note, building permits for November came in at 899,000 units, annualized, exceeding the consensus view. Tomorrow, we will get another look at the housing market with the release of the November’s existing home sales figures. The employment situation is also back in the spot light, with the release of the weekly initial and continuing jobless claims numbers. Further, we will receive the third and final estimate of the nation’s GDP for the third quarter, as well as, a few more notable economic releases. 

In corporate news, shares of Oracle (ORCL) traded higher, as the technology giant posted strong results. Johnson Controls (JCI) stock advanced, after the company issued better-than-expected guidance. In the auto sector, shares of Navistar (NAV) sank on a weak report. Widely traded stocks advancing today included: Radio Shack (RSH), General Motors (GM), and Alcatel Lucent (ALU). Issues headed lower included: General Electric (GE - Free General Electric Stock Report) and Alcoa (AA - Free Alcoa Stock Report).   - Adam Rosner

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


12:00 PM EST - A bit of profit taking appeared to be in vogue after two winning sessions on Wall Street when trading commenced on these shores. Behind the selling may also have been reports that the House of Representatives plans  to pass its own tax bill as a backup option to avert the tax hikes and automatic budget cuts set to occur on January 2, 2013. News of the backup plan, which the White House said it would veto, raised concerns that the two parties still have significant hurdles to overcome in securing a budget deal on Capitol Hill. 

But as the morning hours progressed, the buyers returned and thus as we pass the midday hour on the East Coast, the Dow Jones Industrial Average and the broader S&P 500 Index are now only nominally lower. Meantime, the NASDAQ, on the shoulders of a good showing by technology stocks, has made its way into positive territory. The same can be said for the more risky small-cap Russell 2000 and S&P Mid-Cap 400 indexes. 

From a sector perspective, investors continue to shy away from the defensive-oriented sectors. The utilities, healthcare, and consumer noncyclical stocks are the biggest laggards thus far today. Conversely, the energy, consumer cyclical, and technology groups are showing some leadership. The technology space is getting a nice boost from the stock of technology bellwether Oracle (ORCL), which exceeded expectations on both the top and bottom lines in the latest quarter.  Oracle’ s performance, along with solid gains from the stocks of the major hard drive makers is more than offsetting mild weakness in the shares of technology behemoths Apple (AAPL) and Google (GOOG). 

The Oracle report highlighted a decent day on the earnings front, which also included solid results from cereal and snacks maker General Mills (GIS) and shipping giant FedEx (FDX). Although the latter’s profits fell 12% in the second quarter, likely the result of the impact of Hurricane Sandy in late October, the company’s ground division witnessed an increase in revenues and operating income. The company also noted that it had to add capacity in November and December to service its top customers. The latter is a positive sign for consumer spending during the now-concluding holiday shopping season. Not surprisingly, as noted above, the consumer cyclical stocks were higher on the FedEx news. The group is also being helped by a strong showing from the auto makers. There, news that General Motors (GM) will repurchase 200 million shares of its stock from the U.S. Government for $27.50 a share in a deal that could close by the end of the year, is propelling the group higher. 

Meantime, today’s economic news once gain centered on the housing market. A day after a favorable builder sentiment reading, the Commerce Department reported a mixed, but still encouraging, report on new residential construction. Although housing starts fell 3.0% sequentially in November, they were still up more than 20% from the year-earlier figure. More significant, building permits, which are a better indicator of future building activity, rose nicely on both a sequential and year-to-year basis, with particular strength noted in the South and the West, two of the nation’s largest homebuilding markets. All in all, it was another major sign that this important sector of the U.S. economy continues to recover. The performance of the major homebuilding stocks is mixed thus far today, meanwhile.

Looking ahead to the second half of the trading day, our sense is that barring a major development on the “fiscal cliff” front, which could push the market quickly in either direction depending on the scope and tone of the news, a move on the part of the bulls is quite possible. Today’s earnings and economic news has to be considered market supportive—and we think the bulls could conceivably run with those results in the hours to come. Stay tuned.   - William Ferguson

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 There is a bit of news on the earnings front today. After the market closed yesterday, software developer Oracle Corp. (ORCL) released November-period results that pleased investors, and that stock is trading moderately higher in the premarket. Additionally, Wall Street appeared relieved with November-quarter financials from FedEx Corp. (FDX), the giant package delivery company that is also something of an economic bellwether. That stock is indicating a slightly higher opening this morning. Finally, shares of packaged foods company General Mills (GIS) are trading higher in the premarket on earnings news, while Navistar (NAV) stock is down notably ahead of the bell, after the manufacturer of commercial trucks, diesel engines, buses, etc. released disappointing October-quarter results.

Elsewhere, shares of General Motors (GM) are up sharply in pre-market trading, on news that the automaker will repurchase 200 million shares of its stock from the U.S. Government for $27.50 a share in a deal that could close by the end of the year. The Treasury Department expects to sell its remaining stake (roughly 300 million shares) in GM over the coming 12 to 15 months, thus ending its investment. – 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 bulls made it two big days in a row yesterday, as optimism that the White House and Congress will forge a budget accord by yearend, and thus avoid the dreaded fiscal cliff was in full vogue. In truth, however, there remain many unanswered questions and unresolved and thorny issues before that happy outcome can be achieved. Meantime, the clock is ticking down to a lesser outcome.

For a second day running, though, much of this alternative scenario was being ignored, and stocks were rallying, bringing equities up to a two-month high in the process, with the Dow Jones Industrial Average, which is fast closing in on a double-digit percentage gain for 2012. In all, that index of 30 mostly blue chip companies is now up 9.3% for the year to date. Other winners, beside the Dow, which tacked on another 116 points yesterday, included the NASDAQ, which jumped 44 points, or 1.46%. That stellar gain easily eclipsed the Dow's 0.87% rise. And the small-cap Russell 2000 Composite did even better, adding 1.59%, as the rally spread across most groups and individual stocks.

With the two sides in Washington perhaps in more of a mood to compromise, and with the market not encumbered by economic reports that could potentially muddy up the waters or new vexing international crises, Wall Street could focus wholly on the budget negotiations that will be continuing until a deal is brokered--hopefully by yearend. Our sense right along has been that such an accord would be struck in time, or just shortly thereafter. We see no reason to adjust that expectation.

Meanwhile, it isn't just our market that is gaining, Santa Claus rallies are taking hold across Europe. And this morning, Japan's Nikkei 225 is up strongly, while the bourses on the Continent and in London are all gaining further traction in large measure because of optimism that our political standoff will be resolved satisfactorily.

Now, the focus, while remaining largely on Washington, will shift a modest degree in the direction of the economy, where just this morning, the Commerce Department reported that November housing starts pulled back modestly, while building permits, a more forward-looking metric, gained ground. Even with this mixed showing, the housing recovery remains in full swing, and we would expect further reassuring numbers from this key sector tomorrow when the National Association of Realtors issues its monthly report on sales of existing homes. A modest increase is expected in that series. Other economic reports out over the final two days of the week include data on revised third-quarter GDP growth, where a slight upward change is expected, jobless claims, the leading indicators, consumer sentiment, durable goods orders, and personal income and consumer spending. Most of these reports should be mildly supportive, as the economic expansion rolls on, albeit unevenly.      

Ahead of all this, the equity futures on our shores are pointing to a moderately higher opening in about a half hour from now, as the bulls attempt to make it three in a row today. They would seem to have a good shot at this for now, but the market can be fickle, or as J.P. Morgan wisely intoned a century ago that ``the stock market will fluctuate.'' - Harvey S. Katz

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