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After the Close - The first day of the new trading week was marked by some selective profit taking, as the major equity indexes traded in the red for much of the day, though never straying too far from the neutral line. Overall, it was a low volume trading day, with investors showing no desire to take a major position ahead of some key economic reports later this week and the commencement of the Federal Reserve’s two-day monetary policy meeting tomorrow. At the final bell, the Dow Jones Industrials, the NASDAQ, and the broader S&P 500 Index were all modestly lower. Still, there was a decisive negative tone to trading today, underscored by the more pronounced pullbacks in the small-cap Russell 2000 and the S&P Mid-Cap 400 Index. Furthermore, market breadth was negative, with declining issues outnumbering advancers on both the Big Board and the NASDAQ.

From a sector standpoint, it was a mostly red ink among the 10 major groups. The biggest laggards were the heavily weighted energy and financials sectors, which likely had a role in the broader market averages ending the session in negative territory. There was also some weakness in the consumer discretionary area. Conversely, there was modest interest in the defensive-oriented sectors (i.e., healthcare, telecom, and the utilities). Interest there is likely the product of some investor apprehension ahead of some important economic reports later this week, a few of which (consumer confidence, GDP, and employment) could be game changers for the markets. Some fears about what the lead bank may say following the FOMC meeting on Wednesday may also be prompting some rotation toward the more defensive issues in a market that is clearly overbought at this moment.

Meantime, the big news from the corporate world today was not earnings, though we are in the midst of a heavy reporting period. Investors were clearly focused on some M&A news. Three companies, Omnicom Group (OMC), Elan (ELN), and Michael Baker (BKR), agreed to be acquired, while Saks (SKS) received a takeover offer from Canada’s Hudson’s Bay. However, this should change shortly, as drug giants Merck & CO. (MRK Free Merck Stock Report), Pfizer (PFE Free Pfizer Stock Report), and Amgen (AMGN) are all scheduled to report their latest quarterly tomorrow. Speaking of tomorrow, investors may want to give the consumer discretionary stocks a closer look, as trading of those issues could pick up on the latest report on consumer confidence, which is due out at 10:00 A.M. (EDT). The data could also have an effect on the homebuilding stocks, which have retreated in recent weeks on concerns that lending rates will continue to move higher as the Fed likely begins to taper its bond purchases.      

Elsewhere, Asia’s markets were lower today, with the biggest setback in Japan. Specifically, Japan's Nikkei fell more than 3% after the Bank of Japan’s Governor Haruhiko Kuroda failed to excite investors with his latest commentary. The Bank of Japan leader said that the country’s central bank target of core inflation was 2.0%, but noted that it may take a while before the target is hit. Investors did not view this favorably, as the economy has been suffering from deflation for nearly a decade and a half. Meantime, the European bourses ended the latest session mixed.  - William G. Ferguson

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

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12:40 PM EDT - The stock market got off to a mixed-to-weaker start this morning, and is doing little to turn things around for the bulls. At just past noon in New York, The Dow Jones Industrial Average is down 65 points; the S&P 500 Index is lower by eight points; and the tech-heavy NASDAQ is shedding 17 points. Market breadth is negative, with declining issues outweighing advancers by a wide margin on both the NYSE and the NASDAQ. To underscore the broad nature of the setback, the small- and mid-cap indexes are sharply lower, at this time.

Essentially all of the market sectors are in negative territory today. The energy issues are quite weak. The basic materials group is also lower with some selling in the construction-related stocks. Further, investors are lightening up on some of the financial names, with weakness notable in the insurance area. In contrast, traders are gravitating towards the higher-yielding utility issues, which may suggest some risk aversion is starting to set in. Also, the technology stocks are showing some relative strength today.

Technically, the S&P 500 Index continues to consolidate, pulling back modestly, after edging up towards the 1,700 mark a few days ago. Small pullbacks, after extended runs, are not unexpected, and could even be constructive in a market that is already somewhat overvalued. If we move lower from here, the index may find support at the 1,660 level, or at the 50-day moving average located at 1,645. Sentiment is likely turning a bit bearish today, as the VIX is up over 8%, to 13.76.

As has been the case lately, weakness overseas has done little to set a positive tone for the markets on our shores. Overnight, the selling was concentrated in Asia, as Japan’s Nikkei was off sharply again, losing more than 3%. In Europe, the markets put in an uninspiring session.

Meanwhile, there was just one economic report of note this morning, and that release rather disappointing. Specifically, pending home sales slipped 0.4% in the month of June, which stands in contrast to the downwardly revised 5.8% increase logged in the prior month. The current month’s reading was also a bit worse than had been anticipated. Beyond the flurry of reports set to come out this week, traders are likely concentrated on the FOMC meeting tomorrow and Wednesday, and any related remarks due out after that meeting's mid-afternoon's conclusion. This meeting will precede Thursday's manufacturing report and Friday's July employment issuance.

Finally, among individual issues, traders are reacting to some M&A news today. Notably, Saks (SKS) stock is trading higher on acquisition news. In the drug area, Elan (ELN) shares are up, as that company is merging with Perrigo (PRGO). Omnicom (OMC) stock is also in the news on a merger announcement. -Adam Rosner

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

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Stocks to Watch from The SurveyThere was a flurry of M&A activity over the weekend. The largest deal was between advertising giants Omnicom Group (OMC) and Publicis, which agreed to merge in a $35.1 billion tie up in order to better compete with Internet companies like Google (GOOG) and Facebook (FB). Elsewhere, after much speculation, luxury retailer Saks (SKS) has agreed to be acquired by Canada-based Hudson’s Bay Company, which owns the department store chain Lord & Taylor, for $16.00 a share in cash. OMC and SKS are both trading higher in the premarket as a result. Finally, the stock of drugmaker Perrigo (PRGO) is down in pre-market trading, after it agreed to purchase Ireland-based biotech company Elan for roughly $8.6 billion in cash and stock.  

There is some earnings news out, as well, although most of today’s reports are due out after the market closes. Still, shares of financial services provider Franklin Resources (BEN) are moving higher ahead of the bell on earnings news, while the stocks of car rental agency Hertz Global Holdings (HTZ) and hotel and casino operator Wynn Resorts (WYNN) are indicating lower openings this morning. – 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 stock market made a late and ultimately partially successful charge on Friday, with the key large-cap equity averages erasing an early sharp decline to end the day with slight gains, in the aggregate. In all, the Dow Jones Industrial Average, which had been off by some 150 points at its mid-morning nadir, wound up the session gaining a token three points, while the Standard and Poor's 500 Index gained a point, and the NASDAQ, a leader all day, as it has been for the better part of the past fortnight, rose eight points. However, the overall tone of the market was still rather weak as the small-and mid-cap indexes, as represented by the Russell 2000 Index and the S&P Mid-Cap 400, respectively, still finished in the red, while losing issues beat out gaining stocks on both the Big Board and the NASDAQ.

That said, the market has still been on a tear the past month, or so, following its mid-June swoon, which had been occasioned by worries the Federal Reserve was going to pull the life raft out from under the bulls. However, after Federal Reserve Chairman Ben Bernanke assured the markets that this was not going to be the case, and that even once the bank had toned down and then ended its aggressive bond-buying efforts, it still would leave short-term interest rates at historically low levels. Once that was made clear, the markets regrouped and pushed higher.

Now, the Fed is set to meet again, with its two-day FOMC meeting getting under way tomorrow morning. The conclusion of that get together will engender some concerns, as it always does, as skittish investors will await what the Fed suggests it will be about to do on the interest-rate and bond-buying fronts. Our sense is that the lead bank will again assure investors that it has no intention of delivering a hard message, and that if it does ease back on asset purchases, as many expect, it will not do so until a subsequent meeting or two. As before, we fully expect the Fed to indicate that it will keep short rates at their present low level for another two years or so.

As to other influences in the week ahead, there will be plenty to decipher on the earnings front as hundreds of companies will again be issuing their quarterly sales and profit metrics, although there will be somewhat fewer Dow issuances than over the past week. Still, we will be getting a handful of those blue chips reporting in the next five days, starting out tomorrow with the two giant drug makers, Merck (MRKFree Merck Stock Report) and Pfizer (PFEFree Pfizer Stock Report).

Meanwhile, as we look out to a new day, we find that the markets are under some pressure around the globe, especially in Japan, where the Nikkei 225 tumbled 3.3% overnight, its first close below 14,000 since July 1st, as the yen continued to reverse some of its recent decline. Stocks in South Korea also fell, albeit less notably, as was the case in Hong Kong. The market in China, though, fell by almost two percent in overnight trading. Things aren't quite so bad in Europe, where the bourses generally are mixed, with stocks in France and Germany actually managing small gains. Our futures, meantime, are off modestly, presaging a slightly lower opening when trading commences in less than an hour from now.

As to potential influences this week, in addition to earnings and the Fed, we also will be getting data on consumer confidence tomorrow, the first look at second-quarter GDP on Wednesday, manufacturing activity on Thursday, and the monthly read on employment and unemployment on Friday. Expectations are that the nation created 175,000 jobs in July, while many sense that the jobless rate will tick down from 7.6% to 7.5%.

At the time of this article's writing, the author had positions in PFE.