After The Close - The U.S. equity market was able to recoup a good portion of yesterday’s losses today—though selling picked up some late in the session. Helping matters both on these shores and overseas were remarks from officials at the People's Bank of China that the lead bank would not pressure banks too severely in its efforts to curb accommodative monetary policies and prevent a possible banking crisis. A batch of positive U.S. economic data was encouraging as well. However, given that the forthcoming shaping of U.S. monetary policies, particularly when to cut back on bond buying, will be based on the health of the U.S. economy, the reports did not give the market as big a boost as they normally would have.

Still, the Dow Jones Industrials, the NASDAQ, and the broader S&P 500 Index finished the session 101, 27, and 15 points higher, respectively. Not surprisingly, the economically sensitive sectors, including the energy, financial, basic materials and industrial groups, rallied on the reports that the People’s Bank of China plans to continue to support the world’s second-largest economy. The construction materials, steel, and aluminum issues, which were under pressure yesterday and, in the case of the latter two, big laggards for most of 2013, were up nicely today. Overall, advancing issues led decliners on both the New York Stock Exchange and the NASDAQ, to the tune of nearly four-to-one on the former. 
Meanwhile, we received some very good data on the U.S. economy today. The headline report was from the Conference Board, a New York-based private research group. Specifically, it showed that the Consumer Confidence index jumped to 81.4 in June, bolstered by a more optimistic outlook for hiring. It also was the highest level in more than five years. Consumers' confidence in the economy is watched closely because their spending accounts for nearly 70% of U.S. economic activity. Meanwhile, data on May durable goods orders and new-home sales topped analysts' expectations, while the S&P/Case-Shiller Home Price Index soared in April. As noted, these four good reports would normally give the market a much bigger boost, but all they did was raise more questions about the Fed’s stimulus efforts—the topic that has driven trading for more than a month now.

There was some noteworthy news from the corporate world today. Shares of Walgreen Co (WAG) fell after the pharmacy giant reported weaker-than-expected results. The stock of struggling bookstore chain Barnes & Noble (BKS) also fell sharply after that company posted a wider-than-expected loss in the latest quarter. Conversely, shares of Lennar (LEN) moved higher after the homebuilder reported strong May-period results. The Lennar report, along with the aforementioned homebuilding data, gave most of the homebuilding stocks a nice boost today.

Notwithstanding the recent strong economic reports, our sense is that trading will continue to be dominated by sentiment regarding the Federal Reserve’s monetary policies until second-quarter earnings season commences in a few weeks. The next few days will bring some more economic data, with reports due on revised first-quarter GDP (tomorrow), personal income and spending (Thursday), and consumer sentiment (Friday). -William G. Ferguson

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


12:15 PM EDT - The stock market opened higher today, pulled back slightly an hour into the session, and is now advancing again.  As we pass the noon hour in New York, the Dow Jones Industrial Average is up 115 points (0.8%); the broader S&P 500 Index is ahead 14 points (0.9%); and the NASDAQ is adding on 23 points (0.7%). Market breadth is positive, as advancing stocks are ahead of decliners by well over 2 to 1 on the NYSE.

All of the market sectors are participating in the up move, with particular leadership in the financial issues. The banks, some of which might actually benefit from higher interest rates, are putting in a constructive session. The consumer cyclical names are also having a good day. In contrast, there is some weakness in the technology area, as the computer hardware names are off slightly.

Technically, the S&P 500 Index may have found for some support yesterday, as bargain hunters moved in during the day. While that attempt was not enough to push the major averages into the plus column by the close of the session, it did demonstrate some reluctance to sell. Today, the bulls are doing a bit better. It will be quite important to see if traders maintain their buying into the late afternoon. It should be noted that when traders sell into market bounces, it often signals some exhaustion.  For the bulls, pushing the S&P 500 Index back through the “psychologically significant” 1,600 mark will likely be the next step, and may not be that easy to accomplish. Volumes have been heavy lately, suggesting traders are taking action. As the second quarter is drawing to a close, asset managers, under scrutiny for performance, may be looking to switch into the better-behaving names.     

Today’s move higher likely reflects some favorable economic news. Early this morning, the Department of Commerce reported that durable goods orders increased 3.6% for the month of May, which was a bit better than analysts had expected. We then received some good news concerning the housing market. Specifically, the Case-Shiller Index showed housing prices rising 12.1% in April, which was far better than anticipated. This was followed by a strong new home sales report. New home sales in May reached 476,000 units, annualized, up from 466,000 in April. Elsewhere, consumer confidence improved in June, registering 81.4, versus expectations of about 75. Notably the recent month’s number also surpassed the 74.3 reading logged in the prior month.   

As we close out the second quarter, we will be getting some corporate earnings announcements and guidance revisions. A good earnings season may provide some support for equities. For today, reports were limited. However, we did hear from Walgreens (WAG). That issue is trading lower, on a weaker-than-expected release. - 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 SurveyThere is some earnings news out today, and the biggest winner appears to be Lennar Corp. (LEN).Indeed, the homebuilder has reported better-than-expected May-quarter results and its stock is up nicely in the premarket. Shares of cruise ship operator Carnival Corp. (CCL) are also indicating a higher opening this morning on earnings news, though not to the same extent LEN stock is. On the other hand, investors were not impressed with quarterly financials from drugstore chain Walgreen Co. (WAG) or restaurant operator Sonic Corp. (SONC), and both of those equities are trading moderately lower ahead of the bell. The biggest disappointment appeared to come from bookseller Barnes & Noble (BKS), however. Sales of the company’s e-reader and e-books plunged from a year earlier, while revenues at its brick-and-mortar locations also fell. All this resulted in a steep loss in the April period, and the stock is down sharply in pre-market trading as a result. – 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 charge once again yesterday, and for the third time in the past four sessions on Wall Street, stocks fell sharply. In fact, the selling commenced right from the start, with a loss in the Dow Jones Industrial Average of as much as 248 points before an hour of trading had elapsed. Stocks then spent much of the rest of the day trying to recoup those massive losses, and for a while it looked as though the bulls would succeed in their quest. However, that was not to be the case, and after paring all of that near-250 point Dow loss within minutes of the close, the sellers again rushed in and the averages fell back part of the way.

By the close, therefore, the market was still nursing hefty losses, with the final tally showing a 140-point drop in the Dow, a 36-point setback in the NASDAQ, and a 19-point deficit in the Standard and Poor's 500 Index. Losing stocks easily eclipsed winners on the Big Board to the tune of more than six-to-one, while the ratio on the NASDAQ was more than three-to-one in favor of losing issues. Also falling yesterday were bonds, with the yield on the benchmark 10-year Treasury note at one point climbing to nearly 2.65%. 

Behind this latest selloff on Wall Street were concerns about possibly looming Federal Reserve monetary policy shifts and fears of a credit crunch in China, the world's second largest economy. That one-two punch has clearly taken the measure of the bulls in recent days, sending the Dow down by a cumulative 650 points, or so, in the past four sessions. Joining the bearish fray, meantime, have been commodity prices, and that has helped to pummel the shares of a number of basic materials stocks, notably the aluminums, the steels, and the coal issues, a number of which are now trading at 52-week lows.

The specific concern among some skittish investors on our shores is that the Federal Reserve will seriously harm the U.S. economy when it slows down the purchase of bonds, as it threatens to do by yearend. An even bigger worry is the suggestion that this program, which involves the purchase of $85 billion bonds a month, will terminate by the middle of 2014. Our sense is that such a slowdown and eventual end of this program are realistic responses by the lead bank, as the economy cannot be artificially propped up forever, and that sooner or later this now more-than-four-year-old business expansion must stand on its own. Apparently, the Fed senses that there is sufficient resilience in this maturing upturn to do just that.

Meanwhile, there are musings out of China this morning that a credit crunch is not in the offing and that sufficient expansion tools will be made available. That response came after the market over there had closed, so that stocks in China still fell more than 3% in the overnight hours, following a 5% plunge the day before.

The reassuring news out of China, meanwhile, has helped the markets in Europe to firm up, with the healthy gains now spread across this troubled region, while on our shores, the Standard and Poor's 500 Index futures and the NASDAQ futures are signaling a notably higher opening this morning when trading resumes in about a half hour from now. Also helping the mood on Wall Street is a retreat in bond yields, with the 10-year Treasury note now passing hands at a yield of 2.54%. – Harvey S. Katz   

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