After The Close - Stocks reversed course in the final hour of trading today and ended broadly lower to open the last week of trading in August. At the close, the Dow Jones Industrial Average was down 64 points but the NASDAQ ended flat. More issues declined than advanced on both the New York Stock Exchange and the NASDAQ.

The tone of trading had a tentative feel from the outset, particularly on the Dow, where Wall Street, with its sometimes convoluted bad-news-is-good-news logic, appeared to take a weaker-than-expected July durable goods order as the type of poor economic tidings that might keep the Federal Reserve buying bonds full-tilt well into the future. That lining of thinking did not stand up for the entire session, though.

The NASDAQ’s relative outperformance was likely helped by today’s sweetened merger bid by Amgen (AMGN) for Onyx Pharmaceuticals (ONXX). There also seems to be improved sentiment toward certain tech stocks, including that of Facebook (FB).

But there was a shift in perspective late in the day, though. In part, investors looking for the added punch for stocks the Fed’s securities purchases might bring may have to be careful about what they wish for. If the economic data were to continue coming in weak, economists would probably be inclined to reduce their forecasts for second-half GDP. That, in turn, could make it tougher for companies to generate the type of earnings improvement that would lift their share prices.

At this point, there is enough ambiguity in the business news as a whole to keep investors guessing about what the central bank will do next. However, one important task the Fed often undertakes during and after recessions appears to be largely complete. That is the nurturing back to health of the financial system.

In that regard, the Index of Banking Activity, as published by the American Banker, registered a stable reading for July versus June, with the indicator pointing to modest expansion. Components, such as loan pricing in both the consumer and commercial segments, continued to strengthen. Credit quality trends are also broadly supportive. To some extent, then, the Federal Reserve can consider its work done with respective to nursing the banking system back to health.

Tomorrow brings a report on consumer confidence for August that is expected to about match the prior month’s figure. Earnings reports are also due out from filtration-device maker Donaldson (DCI), where a slightly negative comparison is estimated, and retailer Tiffany (TIF), where analysts look for a small year-over-year gain. -Robert Mitkowski

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


12:15 PM EDT - In what can reasonably be viewed as a repeat of Friday’s trading action, the U.S. equity markets are once again reacting favorably to a disappointing economic report. To wit, the major indexes closed out a challenging week on the upside last Friday, with an apparent boost coming from a steep drop in sales of new homes for July.  The reasoning behind this seemingly counter-intuitive behavior is that any bad news on the economy may keep the Federal Reserve from being too hasty in ending its $85-billion-a-month bond purchases. (The strategy helps keep bond yields and long-term interest rates low, which, all else being equal, is favorable for stocks.) Today, the Commerce Department added more fuel to the pro-stimulus fire, with its report of a 7.3% decline in durable goods orders for July. This was the largest setback in this metric in over a year, and nearly two-and-a-half percentage points below the consensus estimate. At the noon hour of trading in New York, all three major indexes were showing modest increases, led by the tech-laden NASDAQ with a gain of just over half a percent, while the S&P 500 and Dow 30 Industrials each have advanced about a quarter percent.

Meanwhile, the U.K. markets were closed for a bank holiday, but otherwise market action in the European bourses was mixed. To be sure, the weak U.S. durable goods data probably lent some support. However, renewed political wrangling in Italy seemed to knock some of the wind out of trader enthusiasm. Germany’s DAX ended up on the positive side, but just fractionally so, and only after lingering in the red for most of its session. Elsewhere, after a slightly positive opening, France’s CAC-40 never fully regained its footing and closed a couple of points short of the break-even mark. - 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 SurveyWhile earnings news is quite light today, there was some M&A activity over the weekend. Indeed, after a two-month courtship, drugmaker Onyx Pharmaceuticals (ONXX) has agreed to be acquired by biotech company Amgen (AMGN) for $125 a share in cash, for a total of roughly $10.4 billion. Amgen had offered to pay $120 a share in late June, but Onyx rebuffed the offer and tried to solicit more attractive bids. Although that approach didn’t result in other suitors, it did help Onyx get a sweeter deal from Amgen, which is primarily interested in Onyx for its blood cancer treatment, Kyprolis. Investors on both sides of the deal cheered the transaction, and the two stocks are indicating nicely higher 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.

Before The Bell - Wall Street concluded a difficult week on Friday with its second modest gain in as many sessions, with the leading equity averages all making progress over the course of the day, ending near their respective intraday highs.

All told, the Dow Jones Industrial Average added 47 points, pushing back over the psychologically important 15,000 plateau once more, while the Standard and Poor's 500 Index gained a half dozen points, and the NASDAQ, one day after technical glitches had suspended trading for three hours, rose another 19 points, and again provided leadership. This latter index was supported, in the meantime, by a 7.3% gain in the shares of Microsoft (MSFTFree Microsoft Stock Report), which rose after CEO Steve Ballmer said that he would soon retire.   

Influencing the market on this slow Friday in late August, in addition to the pending changes in Microsoft's executive suite, was further speculation regarding the next move by the Federal Reserve. The nation's central bank will hold its upcoming FOMC meeting on September 17th and 18th amid speculation that it could use the occasion to announce that it would start to taper its popular bond-buying program at that time.

However, throwing cold water on that earlier emerging consensus among economists of such early action was the issuance of a dour report on sales of new homes. That closely tracked metric, which had been expected to show just a modest decline from an initially estimated annualized total of 497,000 homes in June to a July run rate of 490,000, instead came out with data showing that sales had plummeted to an annual rate of 394,000 homes last month. By comparison, the June sales total had been 455,000 homes. Although this was just one isolated report, and a notoriously volatile one at that, such unexpected weakness served to temper the taper talk--at least for a few hours. This was clearly a case of bad news being good news for Wall Street, as stocks seemed to get a second wind after that 10:00 AM (EDT) release.

What seemed to many to be behind this sharp drop in housing demand, which ran counter to other monthly data showing gains in homebuilding and sales of existing homes, was a sharp jump in mortgage rates, from a 3.35% weekly average for a 30-year mortgage on May 2nd of this year, to the most recent average of 4.58%. Now, we are not convinced that interest rates are the lone key factor in housing demand. In fact, we sense that employment prospects, affordability, and trends in home prices are often as important. Still, the sudden and pronounced rise in borrowing costs cannot be dismissed. And the feeling among some traders is that such housing metrics could well give Fed officials some cause to hold off on any tapering. Be that as it may, for one day at least, the weaker housing trend seemed to inject some life into the equity market.

By the close, in addition to the solid showing by the leading large-cap indexes, advancing stocks held a wide lead over declining issues on the Big Board, while the small-and mid-cap indexes, off for much of the day in an uneven market session, pushed slightly into the win column by day's end.

Now, as we look, ahead to a new week, we notice that the markets were up overnight in Asia, but are retreating modestly in Europe thus far this morning. Behind this uneven performance are continuing uncertainties over the planned phase out of the Federal Reserve's bond-buying program. The subdued trading in Europe follows talks on stimulus measures at a weekend gathering of the world's central bankers at Jackson Hole Wyoming. Also on the minds of the central bankers at Jackson Hole was the question of the successor to outgoing Fed Chairman Ben S. Bernanke. The leading candidates are former U.S. Treasury Secretary Lawrence Summers and Fed Vice Chair Janet Yellen, who moderated the meeting on Saturday.

Finally, the goings on overseas overnight and this morning and the aforementioned uncertainty on Fed tapering and succession are slightly pressuring our markets so far today, with the equity futures off a bit in the pre-market. This would suggest a lower opening for Wall Street when trading resumes in less than an hour from now. – Harvey S. Katz 

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