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After The Close - It was another volatile session on Wall Street. However, the difference from the performances late last week was that some of the major U.S. equity indexes, despite the market’s overall bearish tone—decliners led advancers on both the Big Board and the NASDAQ—were able to largely tread water for much of the day, in the case of the Dow Jones Industrials and broader S&P 500 Index, before finally closing modestly lower. Meantime, investors again displayed skittishness, with a few of the concerns that hurt trading on Thursday and Friday still on their minds, including fears about a slowdown in China’s economy and worries about some of the emerging markets. But unlike last week, today’s earnings news, which included a nice report from Caterpillar (CAT - Free Caterpillar Stock Report), was a bit more encouraging, and that helped to limit the overall losses on Wall Street. 

At the closing bell, the major U.S. equity averages were all lower. The Dow Jones Industrial Average, though, on the strength of Caterpillar shares, as well of the stocks of United Technologies (UTX - Free United Technologies Stock Report), Merck & Co. (MRK -Free Merck Stock Report), and Travelers (TRV -Free Travelers Stock Report), was able limit it losses to 41 points. The S&P 500 Index was relatively unchanged for most of the second half of the trading session, but weakened in the last half hour. However, the damage was more severe in the tech-heavy NASDAQ and the more risky small-cap Russell 2000. The setback for the latter index is not overly surprising, as when anxiety grows among investors, the small-cap stocks tend to be in less demand—and such thinking might have helped the larger-cap indexes today. Meanwhile, the NASDAQ finished lower predominately on weakness in the technology stocks. Within the technology space, shares of the social media companies, including Twitter (TWR), Facebook (FB), and LinkedIn (LNKD), were notable laggards today. The stock of Sony Corp. (SNE) was also punished after reports surfaced that a major credit rating agency had lowered its rating on Sony’s debt to junk status. Looking forward, trading in the technology sector will probably be heavy this week, as several of the industry’s heavyweights, including Apple (AAPL) (after today’s closing bell), Google (GOOG), Amazon.com (AMZN), and Facebook, are scheduled to report their latest quarterly results this week.

From a sector perspective, in addition to the aforementioned technology stocks, the basic materials and financial groups were the notable decliners among the 10 major sectors, which save for the utilities, were all in negative territory by the close. Overall, the higher-yielding utilities and telecom, which have held their own in recent days given their defensive nature, performed relatively better than the economically sensitive groups. 

As noted, we did get some significant news on both the economic and earnings front. On the business beat, the Commerce Department reported that new home sales fell 7% sequentially in December, but were up nearly 5% year over year. Too, for the full year, new home sales were up a healthy 16%. Shares of the publicly traded homebuilders got a boost from the latest housing data. Meanwhile, the earnings news was mostly positive, particularly from a headline standpoint, as Dow-30 component Caterpillar, which we highlighted in our early market commentary, handily beat expectations and raised its guidance for 2014. Royal Caribbean Cruises (RCL) was another company that said its outlook for this year will be better than Wall Street had been expecting and its stock finished modestly higher. 

Looking ahead, the latest quarterly results from Apple could play a huge role in what direction trading takes tomorrow morning. If the Apple news is good, it could prompt some bargain hunting, at least at the onset of trading, in a technology sector that was hit especially hard the last few days. Another technology stock to keep an eye on is Micron Technology (MU), which has gotten a boost from reports that Greenlight Capital’s Dave Einhorn, a noted hedge fund manager, has taken a medium-sized position in the company. Overall, we expect the market to remain volatile this week, as investors will have to sort through a plethora of earnings and economic reports, while keeping close tabs on what the Federal Reserve’s next monetary move will be with regard to its bond-buying program. All of these events have the capability of changing the direction of trading, particularly the latest news from the Fed. -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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12:30 PM EST - The U.S. stock market is faltering so far today, for a third session in a row. At just past noon in New York, the Dow Jones Industrial Average is off 62 points; the broader S&P 500 Index is down 14 points; and the technology-heavy NASDAQ is lower by 62 points. Market breadth is negative, with declining stocks outnumbering advancers by roughly four to one on the NYSE. All of the market sectors are losing ground today. The healthcare group is slipping, due to weakness in the volatile biotechnology issues. Also, the technology sector is quite weak, with losses in the office equipment area. However, the utilities, which tend to be defensive, are showing some relative strength.

Technically, the U.S. market, which had been range bound for much of January, has finally decided on a direction. Unfortunately for the bulls, that move has been lower. If the Index fails to firm up from here, and a larger pullback unfolds, we would look for some support at the 200-day moving average, located at 1,700. This would imply a 5% decline from its current level, and a roughly 8% drop from the high of about 1,850. The VIX, which is slightly higher to about 18.60 today, has been rising over the past few days. Notably, this sentiment indicator had been stuck at low levels for many months, and a return to 20 area would be indicative of a normal reading. The unusually low readings that we had been seeing were likely an indication that investors had become a bit too bullish, and that may have led to “overbought” conditions. In some sense, a small pullback has been overdue, and, while somewhat painful for the bulls, may well be a positive for the market, as it allows traders to buy stocks at more attractive technical and fundamental levels, which ultimately sets the stage for a sustainable advance.

There was one economic report released today, and it did little to help matters over. Specifically, new home sales came in at 414,000 in December, which was lower than the consensus view, and also lower than November’s downwardly revised 445,000 figure. While there are numerous reports out this week, traders will be watching for any developments that come out of the FOMC meeting taking place over the next few days. No doubt, many will want to see how the Fed handles its asset purchase program.

There were a few earnings releases put out today. Specifically, Dow component Caterpillar (CAT - Free Caterpillar Stock Report) stock is up after the earthmoving company put out a good report. Meanwhile, Apple (AAPL) shares are up slightly, before that technology leader puts out its number after the close today, so stay tuned. - 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 SurveyEarnings news is rather light this morning, although things heat up later today when computer and personal electronics icon Apple (AAPL) is scheduled to release December-period results. For now, heavy equipment manufacturer Caterpillar (CATFree Caterpillar Stock Report) is in the spotlight. Investors were clearly pleased with the company's better-than-expected fourth-quarter earnings, as well as management's new $10 billion stock-repurchase program, and the issue is up sharply ahead of the bell, as a result. Shares of electric utility American Electric Power (AEP) are also indicating a higher opening this morning on earnings news. Conversely, SuperCuts parent Regis (RGS) has reported December-quarter financials that did not live up to investors’ expectations. – 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 - What a difference 48 hours can make. To wit, including last Wednesday's mixed-to-mostly higher close on Wall Street, the leading equity averages had managed to nicely weather some early 2014 selling. In fact, as we entered the final two trading days of the penultimate week of January, the NASDAQ, the Dow Jones Transportation Average, the Standard and Poor's Mid-Cap 400, and the small-cap Russell 2000 were still sporting small cumulative increases for the year.

However, that sense of calm was broken abruptly on Thursday and really shattered on Friday. Behind this sudden loss of market confidence and proliferation of equity selling, which saw the Dow Jones Industrial Average lose 176 and 318 points, respectively, during those two sessions, was a dour manufacturing report out of China, rising fears about currency risk, and economic and stock market malaise in the emerging markets (where the benchmark for emerging market stocks has fallen to a four-month low), an unprepossessing fourth-quarter U.S. earnings season, and belated concerns about stretched valuations in our own market. In our view, the global worries were the immediate cause of the selling; the lackluster earnings results and the frothy valuations were the underlying cause. Overall, it was the worst weekly performance by the Dow in more than two years.

Whatever the causes, the results are not up for dispute, as not only did the Dow fall sharply, but the NASDAQ tumbled 91 points on Friday; the S&P 500 Index dropped 38 points; and the S&P Mid-Cap 400 and the Russell 2000 fell 34 and 29 points, respectively. Losing stocks, moreover, swamped winners by about six to one. There were simply few places to hide.

Another concern, especially in light of the economy's recent strength at home, is the Federal Reserve. The central bank, which voted to start tapering its monthly bond purchases at its mid-December FOMC meeting, is scheduled to meet tomorrow and Wednesday. Few doubt that the Fed will vote to taper again, the key unknown is just how much the bank will choose to wind down its popular program at that time. We believe that the entire effort, which initially had called for $85 billion in monthly bond purchases, will conclude this year. Fed meetings are normally a cause for consternation; now, with the bank planning to be less market friendly, the level of angst is necessarily greater.

Meanwhile, amidst this doom and gloom, there were some winners on Friday. Of note, the day saw a pair of Dow-30 companies report their latest quarterly results. Here, software giant Microsoft (MSFT - Free Microsoft Stock Report) and the household products behemoth Procter & Gamble (PG - Free Procter & Gamble Stock Report) weighed in with better-than-expected results and both stocks gained on the day, which was particularly impressive given the clearly bearish bent of the day's action. Most other groups and individual issues headed lower on the day, though, with some really major setbacks, most notably in the materials group, being recorded. Within this last group, the steels, the fertilizer companies, the aluminum makers, and the energy stocks were hit especially hard. There were few green arrows on most screens.

Now, we get ready for another week, and as we do, and it being the final five trading sessions of January, market historians and a few pundits alike, who follow such lore, will be looking to see where the month ends for some sense of what it will mean for the year. To recap, the first five days of January were lower, and some maintain that this limited stretch can be used to predict the full-year trend. An even bigger following, we believe, puts credence into assessing where the market will wind up after seeing its results for the entire month. As to the merits of such conclusions, we will leave that to our readers. What we do note is that the Standard and Poor's 500 Index has given up a key support at 1,800, while the Dow has fallen below 16,000. We shall see whether or not such breakdowns will usher in a further wave of selling or whether a reversal is close at hand.

As for the day ahead, after the sharp selloff in New York on Friday, the markets in Asia were lower, to no one's surprise, while stocks were heading south this morning in Europe. But over here, a better-than-expected report from earthmoving giant and Dow component Caterpillar (CAT - Free Caterpillar Stock Report) has lifted that stock notably in the pre-market, and that is likely helping to take the Dow, the S&P 500, and the NASDAQ futures to strong indicated gains. Thus, there could be some buying at the open this morning. However, we shall see how long that positive action lasts. Stay tuned. - Harvey S. Katz

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