After The Close - Wall Street endured another sharp selloff today as the realization sank in that the best days for the Federal Reserve’s easy money policies are probably numbered. At the end of the day, the Dow Jones Industrial Average was off by 354 points and the NASDAQ had taken a 79-point haircut. Losers swamped gainers on all of the major exchanges, and the small-cap Russell 2000 index was particularly hard hit.

In truth, the day’s economic news contained several upbeat elements. But investors couldn’t get past the bearishness prompted by the Fed’s vision that the time may be approaching when the central bank won’t need to provide as much stimulation to the economy as it has for the better part of the past year.

It is also true the steep downturn that began yesterday afternoon was at least partly brought on by the fact that many money managers finally found a reason to take profits. Coming into today’s trading, the Dow was up 15% in 2013, which would be a good performance for a full year, let alone less than six months.

The day’s business highlights included a rise in the Conference Board’s leading economic index. Although the gain was a bit less than expected, signs pointed to the possibility of more rapid growth later in the year. In addition, this week’s initial unemployment claims remained at levels consistent with moderate job growth, even though claims rose somewhat more than projected.

Positive reports on the housing market and manufacturing in the Philadelphia region provided further room for optimism on the economy. But the Fed’s plan to unwind its innovative Quantitative Easing program, in which it has been buying $85 billion a month in securities, kept center stage during today’s session.

Nevertheless, a few stocks bucked the downturn. Shares of video game retailer GameStop (GME) rose sharply after Microsoft (MSFT) announced that it would not allow video game publishers to restrict the sale of used games on its upcoming Xbox One console.

The stock of wireless network solutions provider Finisar (FNSR) advanced nicely, too, after the company topped quarterly profit expectations and offered up a better-than-expected view of current operations.

Still, today was an overwhelmingly bad session for stocks on the whole. It would have been nice to see bargain-hunters step in and take charge at some point, but that will have to wait for another day. As for tomorrow, the business calendar is light, with no major economic releases scheduled. -Robert Mitkowski

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


12:25 PM EDT - The stock market selloff that began yesterday afternoon gained additional momentum this morning. All three of the major U.S. indexes opened lower and continued to slide as the session progressed. Downside pressure was seen across the board, as declining issues swamped advancing stocks both on the Big Board and the NASDAQ. As we crossed the noon hour in New York, the broad S&P 500 index was leading the pack to the downside with a decline of 25 points, or 1.5%. Close behind was the tech-laden NASDAQ, which had shed 50 points, or 1.5%, and the blue chips were not faring much better, with the Dow Jones Industrials dropping 205 points (1.4%) and dipping below the 15,000 mark.

Overseas bourses also took it on the chin during their trading sessions, with France’s CAC 40 closing down 3.7%, Germany’s DAX off by 3.3%, and London’s FTSE shedding 3.0%.

As we’ve intimated for some time now, any hint of a change in Fed monetary policy tends to send the markets reeling, and that’s exactly what we’re enduring now. While the official Fed statement after its two-day meeting indicated that it would continue its aggressive bond-buying program, Chairmen Ben Bernanke’s comments at a press conference after the meeting were less-well received. In a broader sense, it was a case of good news/bad news. On the positive side, the Fed is now projecting that the U.S. jobless rate will improve over the next year or so. However, and more importantly for stock traders, this opens the door for a winding down of the accommodative monetary policy that has helped buoy the equity markets this year. Specifically, without the Fed buying $85 billion a month in Treasuries and mortgage bonds, yields would rise, making fixed income investments a more attractive alternative to stocks. Notably, yields on 10-year Treasuries were up 9 basis points this morning (a 4.1% increase), marking a 52-week high of 2.41%.

Of course, the Fed’s intentions are simply a plan, and it remains to be seen whether unemployment does indeed trend as expected.   For now, however, the bears are in charge. – Mario Ferro

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 Corporate news is rather light again today, as we are still a few weeks away from the start of second-quarter earnings season. However, investors are going over a few financial releases this morning. The stock of Rite Aid (RAD) is down modestly in the premarket, after the drugstore operator reported solid May-period earnings but cut its forward looking guidance. On the other hand, shares of wireless networking company Finisar (FNSR), home goods retailer Pier 1 Imports (PIR), and grocer Kroger (KR) are all indicating higher openings this morning, with FNSR stock showing the most strength and KR shares up just slightly. – 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 bears took control of the U.S. equity market in a big way yesterday afternoon, as the major indexes fell sharply on heavy volume following scheduled remarks by Federal Reserve Chairman Ben Bernanke after the release of the latest Federal Open Market Committee statement. The Dow Jones Industrial Average, the NASDAQ, and the broader S&P 500 Index declined 1.3%, 1.1%, and 1.4%, respectively. And by the looks of things today, we could be in for another giant showing from the bears (more below).

The market, which initially did not react forcefully to the formal FOMC statement that said the central bank will continue its accommodative bond-buying program, was spooked by comments from Chairman Bernanke shortly thereafter. Investors did not take kindly to Mr. Bernanke’s remarks that the Fed would start to reduce its quantitative easing measures later this year if the economy and, more so, the labor market were to show a steady improvement, with the potential to end the bond buying by mid-2014. Part of the Fed’s growing optimism is an expected improvement in the jobless rate over the next 18 months. The Fed released updated economic projections that predicted unemployment will fall a little faster this year, to 7.2% by year’s end, and would drop to between 6.5% and 6.8% by the end of 2014, which is close to the lead bank’s target rate. The Fed also said it would keep short-term rates at record lows at least until unemployment falls to 6.5%.

However, equities, which have moved notably higher this year on the accommodative monetary policy, fell sharply and nearly erased all of the prior-two days’ gains in the final two hours of trading yesterday. The selloff was pretty encompassing, with each of the top-10 sectors finishing the session in negative territory. The biggest laggards were the telecoms and utilities, which suffered respective declines of 2.7% and 2.3%. The spike in fixed-income yields, which is continuing today, weighed on the rate-sensitive sectors. The healthcare and consumer noncyclical groups also suffered big losses yesterday.

Meantime, the new day has brought some more worries for unnerved investors. Specifically, a survey of China’s factories showed activity at a nine-month low. The report fueled concerns that the world’s second-largest economy is slowing. And, when combined with yesterday’s comments from Fed Chairman Bernanke, has prompted a sizable global equity selloff. Overnight, all of Asia’s equity indexes fell sharply, while the major European bourses are down more than 2% on the aforementioned concerns. One silver lining, in an otherwise dreary 24 hours for the world financial markets, was an improvement in two key euro-zone surveys of business activity.  The 17-nation’s Manufacturing PMI edged higher, to 48.7 from 48.3, while the Services PMI jumped to 48.6, from 47.2. These readings could be a sign that the confederation’s recession is finally beginning to ease.

With less than an hour to go before the commencement of trading on these shores, the equity futures are down sharply, presaging a very weak opening for the U.S. equity market. Our sense is that it could be a big day once again for the bears, who will be emboldened by the aforementioned global concerns. 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.