After The Close - Stocks meandered through a mixed session for most of the day today, as the bulls were stymied in their quest to right a ship that has been sailing in choppy waters of late. The equity market was under pressure for most of the week, especially on Wednesday, when the major indexes were all notably lower, on fears that the Federal Reserve, emboldened by a series of better-than-expected economic reports, would use the occasion of its upcoming two-day FOMC meeting to vote to start slowing down its rate of asset purchases. This program, which involves the monthly purchase of $85 billion in debt securities, in an effort to lower longer-term interest rates, has proven immensely popular on Wall Street. 

Overall, after a nice opening, the market ebbed and flowed between positive and negative readings, never straying too far from the neutral zone until the final hour, as news from the economy and Corporate America was comparatively light. The lone exception was a reassuring report on producer, or wholesale, prices issued this morning before the stock market opened. In all, the PPI eased by a scant 0.1%, which was in line with expectations. Moreover, if we back out the usually volatile food and energy components, we find that such prices ticked up by just 0.1%. The latter metric, the so-called core PPI, has been consistently muted this year, never rising by more than 0.2% in any month.

However, if those long equities were hoping that this benign pricing issuance would encourage the bulls to make a full-court rush to place buy orders, they were sorely disappointed through early afternoon, although stocks, as noted, did strengthen a little as the session wound down, with modest buying until near the close, when the gains were again pared a bit. It seems that most market pundits are betting that the Fed, encouraged by the economy's increasing resilience over the past several months, will opt to start its tapering moves next week. Of course, we have been here before, only to see the central bank hold off on any tightening moves. This time, though, the economy seems genuinely stronger, while the budget deal reached this week in Congress likely puts fears of a government shutdown at bay, assuming Senate passage of the agreement next week. So, we sense that there is a reasonably good chance that the Fed will finally act at the FOMC meeting.

Having said that, any such move to taper will likely be incremental. Also, an accommodative monetary approach by the Fed will likely remain the order of the day through at least 2014, and short-term interest rates, which the central bank controls directly, are likely to stay historically low until well into 2015. Thus, even if the Fed does taper, the fears engendered by this long-expected monetary move appear excessive.

Of course, this week's pullback may also have been deepened by some plain old vanilla profit taking after the scintillating gains inked on Wall Street this year. Such strength has led to some frothy market capitalizations. In fact, the recent market P/E of roughly 18 is notably above the historical mean and somewhat higher than we would project under normal market conditions looking 3 to 5 years down the road. Still, given the rising corporate earnings stream, the market-friendly Fed policies, and the near-absence of inflation, such a higher valuation would seem justified to some extent.

Meanwhile, as we look out to a new week, we would expect equity traders to remain on edge though Monday and Tuesday, as they contemplate the Fed's possible monetary moves. There also could be some noteworthy reaction on Wednesday afternoon once the Fed does come forth with its latest policy statement. How will Wall Street react? That is always hard to gauge, although we sense that if the market were to resume its pullback early next week and the Fed does the expected on Wednesday, there could be a move higher at that point, in what would be a sort of sell on the rumor, buy on the news sequence. But that is in the future. For now, the recent losses were halted, at least for one day, raising hopes among the bulls that we could yet have a Santa Claus rally in the next 10 days to two weeks. Stay tuned.   – Harvey S. Katz

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


12:15 PM EST - The U.S. stock market is putting in a mixed session today, following a few unconstructive days earlier this week. As we pass the noon hour in New York, the Dow Jones Industrial Average is up nine points; the broader S&P 500 Index is flat; and the technology-heavy NASDAQ is also up one point. Market breadth suggests some underlying weakness to today’s session, as declining issues are slightly ahead of advancers on the NYSE. The major market sectors are also divided. Strength can be found in the basic materials issues with leadership in the paper stocks. Also, some of the consumer cyclical names are making progress. However, the energy sector is declining, with losses in the exploration and production names. Also, the healthcare stocks are weak, as the biotechnology names are out of favor.

Technically, the S&P 500 Index, which has pulled back recently, is looking for support. If we drift a bit lower, that may come at the 50-day moving average located at 1,762. Meanwhile, many traders are probably hoping for a holiday rally, but with the lackluster showing we have seen in early December, and the general sense that stocks are in need of a rest, it remains to be seen if such a move will materialize in the coming week. The VIX, now at 15.43, is actually a bit lower today, suggesting that the tone among traders may be stabilizing.

Traders received limited economic news this morning. Specifically, the Producer Price Index (PPI) declined a bit in November, while the core reading moved up slightly. Both measures were largely in line with expectations, and suggest that there is little in the way of inflation to worry about. Next week will be quite busy, with numerous reports due out. Some of these releases may provide the catalyst needed to move stocks. Specifically, the FOMC will be holding its December meeting, and provide an interest rate decision, along with some remarks. This will, no doubt, be widely watched by traders, looking for insight into any possible Fed policy shifts.

In corporate news, Adobe Systems (ADBE) stock is up sharply, after the software company put out a decent quarterly report, with mixed guidance. There is a bit of M&A news to digest today, too, as Charter Communications (CHTR) is preparing to make an offer to purchase Time Warner Cable (TWC). - 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 SurveyCorporate news is rather light this morning. After the market closed yesterday, action-sports inspired apparel and accessories retailer Quiksilver (ZQK) and software developer Adobe Systems (ADBE) reported quarterly results that garnered warm receptions on Wall Street, and both stocks are trading higher in the premarket as a result. Elsewhere, telecommunications equipment company Qualcomm (QCOM) has promoted COO Steve Mollenkopf to CEO, effective March 4, 2014. Mr. Mollenkopf was rumored to be a possible successor to Steve Ballmer, CEO of software giant Microsoft (MSFTFree Microsoft Stock Report). Both of these stock are up slightly ahead of the bell. – 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 - Taper talk continues to build, and as it does, the stock market continues to fall, albeit modestly. Specifically, after the market sold off rather abruptly on Wednesday, with the Dow Jones Industrial Average sinking by 130 points, that blue chip index followed that weakness up with a decline of 104 points yesterday. However, the blue-chip composite did come back notably during the early afternoon from its worst levels of the day before falling again near the close. Meantime, the NASDAQ, a big loser on Wednesday, managed to pare its deficit to just five points yesterday, while the Standard and Poor's 400 Index, the key mid-cap benchmark, and the small-cap Russell 2000 both gained, but just incrementally. The likely impetus for the recent pullback is a growing belief that the Federal Reserve, which meets next Tuesday and Wednesday, will use that occasion to announce a slowdown in its rate of asset purchases. This initiative has been most popular on Wall Street.

Stocks, meantime, began the day broadly lower, as a pair of economic reports balanced each other out and seemingly did not have a notable effect on the taper talk. On point, the Labor Department reported a surprising jump in weekly jobless claims, with that metric soaring from the prior week's 300,000 to 368,000. A more modest rise, to 325,000, had been the consensus expectation. Although such deterioration in the jobless situation might normally serve to tone down the taper talk, the Commerce Department also reported that retail sales rose by 0.7% last month. That gain was in line with expectations. However, if we factor out the auto component, to get the so-called core rate of sales growth, we find that the increase of 0.4% was twice the estimate. Of note, this was the second solid retail sales gain in as many months.

With these reports largely offsetting one another, the view that the lead bank will start to slowly pare the pace of the bond buying was not disturbed. In fact, if we factor in last week's generally strong employment report and the better-than-expected GDP growth figures announced recently for the third quarter, along with generally solid housing and manufacturing data, the view is building that the Fed will, in fact, start to taper its bond buying sooner rather than later.     

As to other influences, earnings were scattered about yesterday, but for the most part they made less-than-compelling reading, with several companies either disappointing on the top or bottom lines, or issuing lackluster forward guidance. For example, lululemon athletica (LULU), the maker of yoga-inspired athletic wear, posted weaker-than-expected October results, and that stock pulled back sharply in trading. For the most part, though, profit releases were few and far between, as we now are well beyond third-quarter reporting season and still several weeks away from end-of-the-year reporting.  

Elsewhere, in addition to the equity market and some weakness abroad early yesterday, we saw gold prices sink further and the gold and metals stocks continue to move lower, especially early in the day when the market was doing especially poorly. The bond market, meantime, also struggled, with yields on both the 10-year Treasury note and the 30-year Treasury bond continuing to climb. As the taper talk builds, the fixed-income market grows less attractive--hence the rise in rates.

Now, a new day dawns, and after yesterday's generally weaker showing stateside, the markets in Asia were mostly mixed overnight, while the bourses are showing some recovery in Europe thus far this morning. As to our futures, they are in comfortably in the black with a bit less than an hour to go before the start of the new trading day.

Finally, the Labor Department has just issued data on producer prices for November, and that inflation gauge posted a 0.1% decline for the latest month, the third monthly drop in a row. If we back out the volatile food and energy component, meantime, to get the so-called core rate of wholesale inflation, we find that this metric was up just slightly last month, rising by a scant 0.1%. Inflation is not an issue at this time, nor are such data issuances likely to influence the Fed as it prepares for the upcoming FOMC meeting.   – Harvey S. Katz

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