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After the Close - Stocks took a breather today after a two-day rally that saw the Dow Jones Industrial Average gain 474 points. The recent gains came as investors were glad to see Congress and the White House come to terms on an agreement that would avoid across-the-board hikes in income tax rates, and even though much in-fighting on government spending lies ahead.

At the close, Dow had given up 21 points and the NASDAQ had lost 12 points. Gainers modestly outpaced decliners on the Big Board, though.
For a good part of today’s session, it appeared as if Wall Street would keep the rally going by tacking on modest gains. That would have been somewhat unusual, since it is normal to see some profit-taking after such a rapid run-up as experienced the past two days.

But mid-afternoon brought the release of the minutes of the Federal Reserve’s December meeting, suggesting the Fed’s bond-buying program might be curtailed by the end of 2013. That had a sobering effect on investors, who have become used to extremely aggressive monetary policy on the part of the central bank.

In truth, the Fed’s extraordinary measures have had their desired effect on sales of big ticket items, such as homes and autos. The housing market looks to be on a sustainable upward path, and December data showed auto sales at their highest level since the recession. With some tangible results under its belt, it may be that the Fed does not want to stretch its balance sheet too far.

In corporate news, shares of certain retailers, such as Family Dollar (FDO) and Limited (LTD) were weak. On the upside, Transocean (RIG) stock rose when it announced a proposed settlement for its 2010 Gulf-of-Mexico spill liabilities.

Tomorrow brings a few pieces of data expected to shed more light on the speed and direction of the economy. Factory orders for November and the ISM nonmanufacturing index for December are forecast to show modest, if slowing, growth.

The closely watched monthly government employment report is also due out, as it is on the first Friday of almost every month. The payroll data’s prominence has been obscured to a degree lately by the rancorous budget negotiations in Washington, but the bottom line for our consumer-driven economy is still that jobs put money in customers’ pockets. The earlier expectations for 150,000 jobs to have been added in December likely went up when Automatic Data Processing’s (ADP) employment report showed 215,000 private sector positions added.  - Robert Mitkowski

At the time of this writing, the author did not have positions in any of the stocks mentioned.       

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12:30 PM EST - The U.S. stock market opened modestly lower this morning, but has now moved slightly into the black. All told, as we pass the noon hour in New York, the Dow Jones Industrial Average is up five points; the S&P 500 Index is ahead two points (0.2%); and the tech-heavy NASDAQ, which is once again showing leadership, is also up four points (0.1%). Market breadth suggests a positive tone to the session, as advancing stocks are ahead of decliners by nearly 2 to 1 on the NYSE. Most of the market sectors are firming up, with leadership in the energy, consumer cyclical, capital goods, and technology stocks. In contrast, there is some weakness in the financial issues.

Technically, the S&P 500 Index has moved up sharply over the past few days. Although some consolidation here would not be unexpected, it seems traders are still bullish and remain committed to the rally. Trading volumes picked up yesterday, which is a good sign. Also, sentiment remains positive, as the VIX is down again to a reading of just over 14.

Traders received few notable economic reports today. The ADP Employment report showed 215,000 jobs were added to the private sector during December, coming in well ahead of expectations of 150,000 and also higher than the 148,000 jobs added last month. However, initial jobless claims for the week ended December 29th rose to 372,000, where analysts had been looking for a much lower figure. The rise in initial jobless claims also was accompanied by higher continuing claims, and this may have some traders concerned that the employment situation is not as strong as expected. We will find out more tomorrow, when the December employment survey will be released. Meanwhile, this afternoon traders will be digesting the FOMC minutes from the December 12th meeting, and that may provide some insight into the state of the economy, and Fed policy, in particular.

There have been a few corporate news items worth mentioning today. Shares of Family Dollar (FDO) are off sharply, after the retailer posted weaker-than-expected earnings. In technology, Mellanox Technologies (MLNX) is seeing its stock slip, after the semiconductor company lowered its quarterly sales outlook, noting a challenging climate. There has been a bit of merger and acquisition news, meantime. Specifically, Hormel (HRL) stock is up, after the company announced that it will purchase the Skippy peanut butter line from Unilever (UL). - 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 Retailers are in the headlines today, as a number of companies have reported December same-store sales this morning. Early winners appear to include apparel retailer Gap Inc. (GPS), which also announced that it has agreed to purchase high-end boutique Intermix, general merchandise seller Target (TGT), and discount retailers Ross Stores (RST) and TJX Companies (TJX). On the other hand, shares of off-price retailer Family Dollar Stores (FDO) are down sharply ahead of the bell on earnings news, while the stock of Limited Brands (LTD), which operates Victoria’s Secret and other chains, is falling in the premarket due to lackluster December comps.

Elsewhere, shares of Mellanox Technologies (MLNX) are plunging in pre-market trading, after the semiconductor company slashed its fourth-quarter guidance. Conversely, shares of SunPower (SPWR) are indicating a sharply higher opening, on news that the solar panel manufacturer has sold two solar power projects to MidAmerican Energy, a unit of holding company Berkshire Hathaway (BRK.B), for between $2.0 billion and $2.5 billion. – 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 - The new year started with a flourish on Wall Street yesterday, as the leading equity averages soared in early trading and then built on those initial gains as the day progressed. By the close, the Dow Jones Industrial Average had jumped 308 points; the NASDAQ had surged 93 points; and the Standard and Poor's 500 Index was better by 36 points. It was the market's best opening session in total points gained ever and the third best in percentage terms, bettered only in 2003 and 2009. One will recall that 2009 then saw the market complete its down cycle, falling at its trough to below 6,500 on the Dow Jones Industrial Average. After yesterday's rout of the bears, the Dow stands at 13,412. 

Behind yesterday's opening-day fireworks was relief that the contentious Congress had at last come together to avert the dreaded fiscal cliff of mandated tax increases and spending cuts. In truth, though, the agreement, which was signed yesterday by President Obama, held the so-called Bush-era income tax rates at 35% for those individuals making less than $400,000 annually and those couples making under $450,000 a year. However, the spending side of the equation was barely touched, with decisions on those sensitive cuts merely being kicked down the road by some six weeks. Ultimately, that issue, along with the unsolved problem of raising the debt ceiling will need to be addressed. How that is accomplished and under what terms a deal is structured will go a long way towards determining whether or not the current raging bull market will be sustained over the course of the first quarter of this new year and beyond.

Of course, the goings on in Washington are not all that investors stand to be concerned with in the days and weeks ahead. There also is the economy, which yesterday featured data showing that manufacturing activity had increased in December, gaining a modest amount of ground for only the third time in the past seven months. The slightly positive reading in this key survey has now been followed up by a very strong employment report issued today by Automatic Data Processing (ADP). In all, that company's private-sector report showed that 215,000 jobs were added last month. That was well above the 150,000 level expected. This report could augur well for the government's payroll data to be issued on Friday. For now, that report is expected to show that the nation added 150,000 private and public sector payrolls in December. One would assume that in the face of the compelling ADP report that such sights may be raised.

Meanwhile, before Friday's monthly employment report, we are due to get data on weekly jobless claims tomorrow. Then, on Friday, in addition to the employment report, and the companion survey on unemployment, we are due to get data on non-manufacturing activity in December. Here, too, as with manufacturing, a modest rate of expansion is the consensus forecast.

Then, there is earnings season, which is due to get under way in about two weeks. Expectations there are not all that high, so there could well be some pleasant surprises given how low the bar has been set.

Finally, on the heels of the heroic session by the bulls yesterday, the European bourses are generally mixed this morning, while our equity futures, which had been in the red to a small degree earlier today have now turned mixed, following the better-than-expected ADP report. In all, we expect a quiet opening and then perhaps an attempt to push higher over the course of the day, although no repeat of yesterday's festivities seems likely. – Harvey S. Katz

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