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After the Close - What was at one point looking like a clear-cut win for the bulls today, and the end to a three-day slide for equities, ended up being a mixed-to-lower session for Wall Street. A rash of late-day selling, pushed the Dow Jones Industrial Average and the broader S&P 500 Index lower. However, not all news was bad, as there was strength in the small- and mid-cap markets. The small-cap Russell 2000 hit an all-time high during the session and, along with the S&P Mid-Cap 400 Index, fared better than the large-cap indexes. Overall, advancing issues led decliners on both the Big Board and the NASDAQ, but the spread narrowed considerably in the last-half hour of trading.

A closer examination showed that the price-weighted Dow Jones Industrial Average Index was undermined by weak showings from four components, specifically shares of International Business Machines (IBM Free IBM Stock Report), JPMorgan Chase (JPM– Free JPMorgan Stock Report), and new members Goldman Sachs (GSFree Goldman Stock Report) and Visa (V Free Visa Stock Report). In the relatively unchanged S&P 500 Index, a notable laggard was the stock of Red Hat (RHT), which fell sharply after the technology company posted disappointing quarterly results. On the NASDAQ, which fared relatively better than the Dow 30 and the S&P 500 Index, shares of Facebook (FB) stood out, hitting an all-time high at one point during today’s session, at just under the $50-a-share mark, before ending up at $48.45 a share.

Among the 10 major sectors there was mild leadership for most of the session from the cyclical sectors, with the biggest gain recorded by the industrial stocks. Technology and telecom issues were also mildly in favor today. On the homebuilding front, both KB Home (KBH) and Lennar (LEN) posted quarterly earnings that surpassed consensus expectations, and the latter reported strong gains in new orders and backlogs. In related news, home prices rose significantly year over year according to a reported issued early in the day. Meanwhile, the yield on the benchmark 10-year Treasury note, which is used in setting longer-term rates, including mortgage rates, also traded at its lowest level since mid-August today, helping the performance of the homebuilding stocks, as well.

The encouraging housing news helped somewhat offset a nominally lower-than-expected reading on consumer confidence. Specifically, The Conference Board reported that the Consumer Confidence Index, which had increased slightly in August, decreased in September and now sits at 79.7. All in all, it was a reasonable, albeit not an especially welcoming, report. More important, it does not alter our view that the current business upturn is sustainable, nor should it unduly influence the Federal Reserve as it considers a possible monetary tapering adjustment over the next few months--or earlier.

Meantime, the countercyclical sectors did not fare well today. The consumer staples, healthcare, and utilities groups had short stays in positive territory before late-day selling pushed them back into the red. The aforementioned easing in Treasury yields, now at a six-week low, did lend some support to higher-yielding equities—primarily because such a rate environment makes fixed-income securities a less desirable alternative for income-seeking investors. Our sense is that some of the pullback in fixed-income yields may be the result of growing concerns that the forthcoming budget and debt-ceiling negotiations on Capitol Hill will be contentious and not yield any significant long-term solutions. The last few budget negotiations have produced only “kick the can down the road” agreements between the two political parties and in the process raised the volatility in the stock market during the negotiations.

Speaking of volatility, the S&P 500 Volatility Index (or VIX), which is also known as the fear gauge, despite the market's late-day selloff, declined today and now sits just above 14, a level that clearly suggests that the market is overextended and thus susceptible to any negative news. We don’t believe that the forthcoming economic data—including Thursday’s final revision to second-quarter GDP—will provide any negative surprises, but the aforementioned contentious budget talks could unnerve investors as the October 1st deadline date for any agreement approaches.  - 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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12:00 PM EST - The U.S. stock market got off to a weak start this morning, but has since recovered and has found its way into positive territory. While encouraging, it remains to be seen if the bulls can continue their buying campaign through the afternoon.  Investors should note that the closing hours of the trading day are often as telling as the opening.  All told, just past noon in New York, the Dow Jones Industrial Average is up 24 points; the broader S&P 500 Index is ahead three points; and the NASDAQ, which is again a source of leadership, is adding on16 points. Market breadth, which had been weak earlier, now suggests a healthier tone to the session, as advancing stocks are slightly outnumbering decliners on the NYSE. Further, most market sectors are making progress. Specifically, the industrials are moving higher today, with strength in the aerospace and large diversified names. Some of the consumer cyclical stocks are also doing well. The energy issues, too, are ahead with leadership in the exploration and production stocks. In contrast, the utility stocks are slipping today.

Technically, the S&P 500 Index hit high ground a few days ago, but then started pulling back. The move was not entirely unexpected, as the market, after a strong run, may have gotten  “overbought”. Slight pullbacks can be constructive, as they give investors a chance to get acclimated to the market at the current level, and further allow some a chance to initiate new trades or reposition their holdings.

Meanwhile, this morning traders received a few pieces of economic news to digest. The housing market seems to be extending its recovery. The Case-Shiller 20-City Home Price Index showed prices rising 12.4% in July. This showing was slightly better than anticipated, and follows healthy gains in June. However, the consumer may be a bit fatigued, as the Conference Board’s consumer confidence number came in at 79.7 in September, which was down from the August reading, but in line with expectations.

In corporate news, Applied Materials (AMAT) stock is trading higher after the technology company announced plans to merge with Tokyo Electron. Also in the technology area, Red Hat (RHT) stock is slipping as investors are concerned about guidance. In the housing arena, shares of Lennar (LEN) are up a bit, after the home builder released stronger-than-anticipated profits. - 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 SurveyInvestors are going over several earnings reports today, and early indications are that they were pleased with August-period results from homebuilders KB Home (KBH) and Lennar Corp. (LEN), as both of those stocks are up modestly in pre-market trading. Wall Street was even more impressed with August-quarter financials from CarMax (KMX), the nation’s largest retailer of used cars, and that stock is up nicely ahead of the bell as a result. It wasn’t all good news, however, and shares of cruise ship operator Carnival Corp. (CCL) are indicating a slightly lower opening this morning on earnings news. The biggest loser, however, appears to be Red Hat (RHT). Indeed, shares of the software developer are down sharply in the premarket, as investors took issue with the company’s weaker-than-expected August-period billings.  

Elsewhere, the stock of The Jones Group (JNY) is up notably ahead of the bell, likely due to newspaper reports that a number of private-equity firms are interested in acquiring the apparel company. The stock of Applied Materials (AMAT) is also indicating a sharply higher opening this morning, on news that the producer of semiconductor wafer fabrication equipment agreed to merge with industry peer Tokyo Electron in an all-stock deal that values the combined entity at roughly $29 billion. Finally, National Oilwell Varco (NOV), a provider of equipment for oil and gas drilling, has announced plans to spin off its distribution business, thereby creating two separate publicly traded companies. NOV stock is up slightly in pre-market trading. – 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 - It was a dull, listless, and uneventful session on Wall Street yesterday to start the new week, and following a notable selloff this past Friday. Specifically, stocks opened the day narrowly mixed, with some further slippage in the Dow Jones Industrial Average and an unimposing gain registered by the tech-heavy NASDAQ. The latter improvement was largely the result of a strong reception for Apple (AAPL) shares and its latest product offering. In all, that tech stalwart rose sharply, at one point inking a gain of close to 30 points, and in the process passing hands at close to $500 a share before easing back slightly later in the day, but still managing a 23-point gain for the session.

Unfortunately for the bulls, there were not enough positive stories to go around, and the markets soon fell in unison, albeit not too sharply, with some of the weaker readings recorded around the middle of the day. When the dust settled, the Dow Jones Industrial Average had fallen 50 points; the Standard and Poor's 500 Index had shed eight points; and the NASDAQ had given back nine points.

One reason for the recent lethargy on Wall Street is the continuing worry that the Federal Reserve will soon vote to taper its popular asset purchasing program, even after the central bank had made noises last Wednesday about not being ready for such a move. The latest regional Fed President to suggest that the bank may be on the cusp of a more restrictive set of policies was New York Fed President William Dudley, who said that the framework for withdrawing stimulus is ''still very much intact,'' as long as the economy continues to firm up. Such an observation was in line with suggestions made this past Friday by another regional bank President. Those earlier comments had helped to drive the equity market decidedly lower late last week.

Another contributor to the latest weakness in the market was concerns about the fast-approaching October 1, 2013 deadline for the Congress to avoid a government shutdown. Negotiators are attempting to reach some accord in a highly charged atmosphere. It seems that with a succession of musings from Fed Presidents and no shortage of political posturing in the nation’s Capitol, the mood among investors has turned negative rather quickly.

All of this does not suggest that we are on the edge of some serious profit taking or, worse, a market correction. We have, in fact, been down this road before, with a string of lower sessions--we are now up to three--causing skittish investors to fret that we were entering a longer-period of falling equity prices. And on almost every occasion over the four-and-a-half year life of this historic bull market, the pessimists have been quickly proven wrong. The bulls expect that to be the case this time as well. Will they be proven right? It is too early to say, though the modest selloff to date has been orderly, with no signs of a panic unloading of equities.

As to these twin issues, the Fed is going to taper its bond buying at some point, whether it is in October, December, or early next year. As to the government, our sense is that some temporary deal will be hammered out before much longer, or at worst, we will get a brief government shutdown. Neither event should unduly cripple the slowly and unevenly recovering economy, although such developments will likely lift the level of fear on Wall Street and could push stocks lower for a time.  

Meanwhile, in other matters, the Conference Board will issue its report on consumer confidence later this morning; a small easing in that closely watched metric is the consensus forecast. That report will usher in a fairly busy week for economic news, including this Thursday's final revision of second-quarter GDP. 

Finally, a new day is about to unfold on Wall Street, and after a somewhat weaker session overnight and this morning across Asia and Europe, our equity futures are showing little aggregate change suggesting a relatively mixed opening when trading resumes in New York in about 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.