After The Close - The bulls on Wall Street didn’t have a lot to hang their hats on coming into today’s trading, other than the fact that stock prices were noticeably lower than earlier in the week, but managed to hold their own in a skittish session.

Global markets still unnerved mostly by the Federal Reserve’s contingent plan to pull back liquidity and partly by concerns about economic growth in China had a couple of more issues to contend with this morning. One was the return of volatility in Europe, where a political party in Greece pulled out of that nation’s coalition government. On top of that, the International Monetary Fund was threatening to hold back bailout funds earmarked for Greece. Those developments made for an uncertain backdrop at the opening bell.

Moreover, after Thursday’s close, tech bellwether Oracle (ORCL) released earnings, in which it met profit expectations but disappointed in terms of software revenue generation. Its shares slipped notably as a result, throwing a wet blanket on the technology sector as a whole.

But by the end of the day, the Dow Jones Industrial Average had tacked on 41 points in a see-saw session. The NASDAQ was off seven points, though, hurt by the weak sentiment arising from Oracle’s earnings report. The broader market was almost evenly split between gainers and losers on the New York Stock Exchange. But there were many more stocks hitting new 52-week lows than highs, indicative of the market’s weakness since late Wednesday. 

Essentially, investors have had to quickly adjust their views to incorporate the possibility that in the coming months, the Federal Reserve may not be as accommodative as it has been since late 2012. That’s when the central bank starting buying Treasury securities and mortgage bonds in a big way, and the stock market rallied on a wave of optimism. But if the Fed does soon feel that business conditions are strong enough for it to pull back support, stock price action might well then be tied to a greater extent to actual economic performance, rather than the more vague hopes for rosier times ahead.

Although this was a down week for stocks, it ended with sentiment improving a bit. Monday brings the start of the final week of trading in June, and for the first half of 2013. There are no major economic releases due out until Tuesday, when reports for May’s Durable Goods Orders and New Home Sales are due out. -Robert Mitkowski

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


12:20 PM EDT  - As we started the final day of what has been a rollercoaster week for stock prices, the U.S. equity markets opened with what appeared to be the best of intentions. Following the biggest two-day slide so far in 2013, traders had seemingly dusted themselves off and were prepared to send stocks higher. All three major indexes opened up this morning, but the enthusiasm was short lived as the Dow Industrials (which had been up as much as 100 points from the prior day’s close), S&P 500 and the NASDAQ dipped back into the red shortly after 10 A.M. EDT.

Traders and investors are likely still digesting and reassessing Wednesday’s comments from Fed Chairman Ben Bernanke. The Fed’s official statement following its two-day FOMC meeting remained unchanged, indicating that it planned to hold short-term interest rates near zero so long as unemployment stays above 6.5% and inflation keeps below 2.5%. However, the markets reacted strongly to Mr. Bernanke’s indication that the Fed may start scaling back its bond purchases as early as this year, and perhaps stopping altogether by mid-2014. This apparently rattled a large swathe of market participants that had been banking on quantitative easing remaining in effect a while longer. Government bonds tumbled across the globe and the selloff has extended to a third day, with U.S. 10-year Treasury yields hitting 2.51% late this morning, marking their highest level in nearly two years.

Of course, things could change, particularly if U.S. unemployment fails to improve to the lower levels projected by the Fed. In which case, the current monetary stimulus could continue apace well into next year, or perhaps even take another tack. That all remains to be seen. For now, as we cross the noon hour of New York’s trading day, the indexes have slumped to new session lows. The blue chips, as represented by the Dow Industrials, are holding up the best, down about one-third of a percent.  Meanwhile, the broader-based S&P 500 is not too far behind, with a decline of about half a percentage point. However the NASDAQ, which includes more-speculative components, was off a full percentage point.

A similar theme was echoed at the European bourses, only more emphatically, with early gains erased by late afternoon selloffs. Germany’s DAX took the biggest hit, falling nearly two percent on the session. France’s CAC 40 was off by a little over one percent, while London’s FTSE 100 was down about three-quarters of a percent. - 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 – There is some earnings news out today. The biggest disappointment was enterprise software giant Oracle Corp. (ORCL).May-period earnings were in line with investors’ expectations, but sales missed the mark for the second straight quarter, raising questions about the demand for its products and increasing competition. The stock is down sharply in the premarket as a result. Shares of restaurant operator Darden (DRI) are also indicating a lower opening this morning on earnings news. On the bright side, the stock of CarMax (KMX) is up nicely ahead of the bell, after the used car dealer impressed investors with its May-quarter results. – 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 - Yesterday proved to be a very difficult day for investors long both equities and bonds. There were no places to hide, with the equity market suffering its biggest two-day slide in 2013. Investors were once again rattled by worries that the Federal Reserve will begin to pull the plug on its massive ($85 billion a month) bond-buying program, perhaps by the end of this year. (The central bank’s accommodative monetary policies have been in place since the financial meltdown and are being credited with the equity market’s strong performance over the first-five months of this year.) Also spooking the investment community yesterday were signs that China may be facing a credit crunch (more below).

The latest worries on Wall Street wiped out the equity market’s prior-two months of gains in less than two trading sessions. When all was said and done yesterday, the Dow Jones Industrials had plummeted 353 points (or 2.3%); the NASDAQ finished 79 points (or 2.3%) lower; and the S&P 500 Index tumbled 41 points (or 2.5%). For the latter index, it was the biggest one-day decline since November, 2011.

As noted, there was simply no place to hide for unnerved investors, with each of the top 10 sectors finishing well into negative territory. The more-defensive, dividend-oriented utilities and consumer staples stocks posted the biggest losses. The rise in bond yields (more below) likely prompted some rotation out of these higher-yielding equities. The basic materials and energy groups were also notable laggards yesterday. Overall, declining stocks outnumbered advancers by a 12-to-1 margin on the Big Board and by a 6-to-1 ratio on the NASDAQ.

Investors were clearly rattled by thoughts that the Fed will begin stepping on the monetary brakes, with a reduction in the rate of bond purchases by the end of this year seeming more likely. Without the massive stimulus measures, consumers will probably pay higher mortgage rates and businesses will pay more to borrow money. Historically, such a scenario has not been well received by equity market participants—and that definitely was the case over the last two trading days.

Meanwhile, yesterday brought additional worries about the international markets. Specifically, signs that China—the world’s second-largest economy—may be facing a credit crunch, roiled investors both here and abroad. In a nutshell, there are indications that China’s banks are showing greater reluctance to lend to each other. That has pushed the inter-bank lending rates notably higher.

Yesterday’s global selloff was not confined to equities, as fixed-income securities were hammered the last two days. In fact, the yield on the benchmark 10-year Treasury note, which moves in the opposite direction to the price, rose sharply, finishing the session at 2.41%, its highest level since August, 2011.

Meantime, the final trading day of the week seems to have brought some calmer heads after the aforementioned frenetic two-day selloff on Wall Street. There is not much news of note, other than unconfirmed reports that the People's Bank of China injected about $8 billion into the country’s banking system following the recent rise in interbank lending rates. Perhaps, it is just a case of some bargain hurting, which is looking like it will carry over to our shores this morning. Overnight, Japan’s Nikkei 225 finished higher, while the major European bourses are sporting gains as trading moves into the second half on the Continent.

With less than an hour to go before trading commences on these shores, the equity futures are pointing to a notably higher opening for the U.S. equity market. Bonds are also showing some strength. That said, with little news of note on the economic and business fronts today and trading volume tending to be light on summer Fridays, a volatile conclusion to the trading week can’t be ruled out. Volatility has picked up significantly in recent weeks, with the S&P 500 Volatility Index finishing above 20 yesterday for the first time since December 28, 2012, when the markets were unsettled ahead of the “fiscal cliff” negotiations.  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.