After the Close - The equity market closed today with investors thinking what a difference 24 hours can make. Specifically, the bulls responded to yesterday’s sharp selloff with a stellar broadbased gain of their own. Market sentiment was helped by a few positive developments, including some decent economic data, solid earnings results from two financial giants, and some dovish commentary from a Federal Reserve District leader. All of these events combined to help push stocks notably higher and pare a sizable portion of yesterday’s outsized losses. All in all, investors were feeling a bit more bullish today and displayed it by returning to some of the more risky sectors. The S&P 500 Volatility Index (or VIX), also known as the “fear gauge,” fell sharply in the latest session. The low volatility reading, however, also could be a sign of growing complacency among investors.

At the final bell, the Dow Jones Industrial Average, the NASDAQ, and the S&P 500 Index were up 116, 70, and 20 points, respectively. The day’s most impressive performance came from the NASDAQ, which was helped by a strong showing from the small-cap technology stocks, the financial issues, and some big technology names, including Intel (INTC Free Intel Stock Report), which is scheduled to report its latest quarterly results after the close of trading tomorrow, and Google (GOOG), which announced the strategic acquisition of Nest Labs for $3.2 billion. Also encouraging today was the move higher in the small- and mid-cap markets, which may be a sign that investors are not all that averse to adding some risk to their portfolio even in an overextended market.

As noted, the economic news was mildly encouraging today. Before the market open, we learned that retail sales climbed 0.2% in December, which was slightly better than the consensus expectation. While it is yet another sign that the economy is improving, the report did not help the consumer cyclical stocks all that much, as the December gain, when combined with the downwardly revised November figure, showed that retail sales grew by an unimposing less than 1% during the holiday shopping season. Among the 10 major sectors, the consumer discretionary stocks registered one of the smaller gains today. Within the retail space, two notable individual laggards included GameStop (GME) and Bed Bath & Beyond (BBBY). Other positive economic developments today included data showing subdued import and export prices in December, another indication that inflation remains in check, and a rise in the NFIB Small Business Index. The latter report may have given a boost to the small-cap in the latest session. Investors should also note that we will get more data on inflation over the next two days with reports due on both producer (wholesale) and consumer prices.

Meantime, today’s earnings news was constructive to the performance of equities. Specifically, investors were encouraged to see banking giants JPMorgan Chase (JPM – Free JPMorgan Stock Report) and Wells Fargo (WFC) report solid quarterly results today—though most of the latest profit gains were driven more by cost-cutting than by revenue generation. Still, the earnings news gave a boost to the financial sector, which had plenty of companionship in the plus column from the other major groups. There was some leadership today from the economically sensitive issues, most notably the industrial names.

And last, but certainly not least in the minds of most investors, commentary from a Federal Reserve official once again had an impact on market sentiment. One day after investors were a bit unnerved by remarks from the Atlanta Fed President Dennis Lockhart that he favors additional monetary tapering in the coming months, comments from Philadelphia Fed President Charles Plosser that the FOMC is in no rush to raise rates even if the jobless soon falls to 6.5% spark some buying on Wall Street. Of course, he also opined that he saw additional tapering ahead. We will get more insight on what the central bank leaders may be thinking tomorrow afternoon when the Fed releases its latest Beige Book summation of economic conditions at 2:00 P.M. (EDT). That report could spark a pickup in trading in the second half of tomorrow’s session.  - 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 EST - The stock market is moving nicely higher today, selectively reversing much of yesterday’s decline. At past noon in New York, the Dow Jones Industrial Average is up 71 points; the broader S&P 500 Index is advancing 14 points; and the technology-heavy NASDAQ, which is leading the averages higher, is up 56 points, a better-than-1% move. Market breadth is decidedly favorable, as advancing stocks are outnumbering decliners by about three to one on both the NYSE and the NASADQ. Further all of the market sectors are firmly in positive territory. There is leadership in the technology sector, as the semiconductor and Internet names are doing well. The healthcare stocks are also making strides, thanks to strength in the biotechnology issues. While there is no weakness in the market, the defensive utilities are lagging relative to the other groups. This further suggests that traders may be feeling less risk-averse, at least for today.

Technically, stocks sold off with some intensity yesterday. Notably, volumes also rose quite a bit, suggesting that the move lower may have some staying power. Fortunately for the bulls, in what appears to be a somewhat common Monday/Tuesday reversal, the market is recovering today. Judging by the broad-based strength we saw this morning, the move may well hold up through this afternoon, too. However, we will still have to wait and see how things unfold. For now, sentiment is bullish, as the VIX is lower by almost 10%, to about 12. Notably, this is not far from the 52-week low reading of 11.05, and likely suggests some complacency on the part of traders.

Meantime, investors received a few economic reports today. Retail sales rose 0.2% in December, which was better than the 0.1% reading many had expected. These figures are encouraging, and may indicate that the economy has been doing a bit better than the December Employment report would suggest. Meanwhile, there is likely little to worry about in the way of inflation, as import and export prices remained subdued in December. Tomorrow, we get more information on this front, as the Producer Price Index is slated to be released. We also hear from the Fed at 2:00 PM, as the Beige Book summation is due out.

In the corporate arena, the earnings reports are starting to stream in. Today, we heard from some big banks. Specifically, JPMorgan Chase (JPM - Free JPMorgan Stock Report) shares are up just slightly, after the banking giant turned in a positive-to-mixed fourth-quarter report. Wells Fargo (WFC) stock is advancing a bit too, on a decent release. However, things did not go so well for GameStop (GME), as that issue is sharply lower. Apparently, investors were not too pleased with recent guidance. - 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 SurveyBank earnings are on investors’ minds today, after two of the nation’s largest financial institutions, JPMorgan Chase (JPMFree JPMorgan Stock Report) and Wells Fargo (WFC), released fourth-quarter results this morning. Wall Street did not seem to have a major reaction to either report, as JPM stock is up marginally ahead of the bell, while WFC is indicating a slightly weaker opening. Investors were more impressed with preliminary fourth-quarter results from medical supplies company Intuitive Surgical (ISRG), however, and that stock is up sharply in the premarket, as a result.

Elsewhere, on the M&A front, cable television provider Charter Communications (CHTR) offered to purchase larger rival Time Warner Cable (TWC) for $132.50 a share in cash and stock, just ahead of TWC's preannouncement closing price. Both stocks are up slightly on the news, although Time Warner Cable's Board of Directors has already rejected the offer. Additionally, Internet giant Google (GOOG) has agreed to pay $3.2 billion for Nest Labs, a maker of household items like thermostats and smoke alarms that are connected to the Internet. GOOG stock is up slightly in pre-market trading, in response. 

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

Before The Bell - The stock market, which has been a listless performer thus far in 2014, began the second full week of the new year in predictable form, namely on another lackluster note. Specifically, after meandering about at modestly lower levels for most of the morning, and then undertaking a few weak attempts to rally as we headed toward the noon hour on the East Coast, the sellers got a second wind as the afternoon commenced and drove equities notably lower into the second half of the session.

All of this took place on what was one of the last light news days for the next several weeks. On point, the next four sessions this week will feature a host of key economic reports, headlined by data on retail sales (see below), producer and consumer prices, the Federal Reserve's Beige Book economic summation, manufacturing surveys on New York and Philadelphia, weekly jobless claims, housing starts, industrial production, capacity utilization, and consumer sentiment. Also, of note, earnings season for the recently concluded fourth quarter is also on the docket, as some leading financial companies and industrial giants are set to issue their closely tracked metrics.

But much of that is still pending. As to yesterday, save for a few reporting companies and some Monday merger news, there was little for investors to hang their hats on, and in such a news vacuum, comments by analysts and Federal Reserve officials can take on a life of their own. And that is just what happened yesterday, as such musings helped to drive equities down aggressively in the afternoon.

On point, the Atlanta Fed President Dennis Lockhart intoned that he supported imposing additional monetary tapering steps in the coming months in spite of the fact that job growth had unexpectedly taken a sharp turn for the worse in December. That is when the nation created just 74,000 new positions, barely a third of the expected increase. Such tapering talk, even if it represents the thoughts of just one Fed official, is anathema to the bulls, especially as we are just two weeks from the next FOMC meeting. Also, a Goldman Sachs (GS - Free Goldman Sachs Stock Report) spokesperson noted that the S&P valuation is looking "lofty by almost any measure." Neither comment, apparently, was well received by Wall Street.

Thus, stocks, after pressing a bit lower for the first half of the session, really sold off after lunch and through much of the afternoon, at one time, pushing lower by nearly 200 points on the Dow Jones Industrial Average and some 75 points on the tech-heavy NASDAQ. The small- and mid-cap indexes, as represented by the Standard and Poor's 400 Index and the Russell 2000 really took it on the chin, losing at their worst levels of the day, close to two percentage points. That was a reversal from Friday when the more speculative indexes had clearly outperformed the larger-cap averages, as represented by the Dow and the S&P 500.          

Overall, our sense is that the market is overbought and that valuations are extended. That said, markets can remain pricey for any length of time, just as they can stay undervalued for long periods, just as they did in 2008 and early 2009. Of course, one day's action should not be viewed as a watershed, or even a trend; in fact, even the lackluster showing to date this year has been more than contained, and the upturn is not yet broken by any means. Still, stocks have faltered, as evidenced by yesterday's Dow loss of 179 points; the 23-point setback in the S&P 500 Index, and the 61-point drop by the tech-laden NASDAQ.

Meanwhile, as we look out to a new day, the selloff in New York was followed up by losses in Asia overnight and in Europe thus far this morning. Now, on our shores, a report out just minutes ago showed that retail sales growth had slackened in December, with the critical Christmas shopping season having been underwhelming to say the least. Our sense, though, is that interest rates, which fell yesterday, and that is bullish, Fed policy, and economic results will be taking center stage for a while. That said, the U.S. equity are trending nicely higher at this time, suggesting that we could get a bounce at the opening today. We also would note that there is often a Monday-to-Tuesday reversal in the market, so the bulls might have something to cheer as the day unfolds. 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.