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After The Close - The stock market got off to a weak start this morning, but the selling intensified dramatically in the afternoon. By the close of trading, all of the major averages were deep in negative territory. The Dow Jones Industrial Average was down 1,175 points; the broader S&P 500 Index was off over 113 points; and the NASDAQ was lower by 273 points. Market breadth was quite negative, with declining issues outpacing advancers by an overwhelming margin on the NYSE. All of the major stock market sectors lost ground, with considerable weakness in the energy, financials, and healthcare issues. The utility group, which is viewed as a defensive, suffered less severe losses.

Elsewhere, traders received just one notable economic news item this morning. Specifically, the ISM’s Nonmanufacturing Index came in at 59.9 for the month of January. This reading was better than the December number, and was also nicely ahead of analyst expectations. Tomorrow will be a light day for news, as well. However, the nation’s trade balance for the month of December will be reported.

Meanwhile, a few corporations weighed in with their results today. Specifically, shares of Bristol-Myers Squibb (BMY) slipped in price, even though the drug maker delivered respectable results. Shares of Sysco (SYY) lost ground, too, despite providing a decent report. It is important to note that the fourth-quarter earnings season is not yet over. Many reports are still to be released, especially in the small-cap arena.

Technically, the stock market has started to run into some resistance. While the corporate outlook remains bright, traders now seem worried about equity valuations, rising interest rates, and the possibility of inflationary pressure building in the broader economy. A stock market pullback, and some overdue profit taking, does not come as a big surprise at this point. However, it remains to be seen how much more selling might be in store.  - Adam Rosner

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

  - 1:40 PM EST - Following a frantic selloff this past Friday, in which the 30-stock Dow Jones Industrial Average dropped 666 points on growing interest-rates fears, stocks began the new week tumbling anew. In all, after the first few minutes of trading, the Dow was off by another 350 points.

One of the catalysts for the follow-up drop was an additional rise in interest rates, with the 10-year Treasury note yield's climbing to 2.88% early on before settling back at 2.84%.

However, following that initial selloff, the market came back, and did so aggressively. Indeed, as the first hour concluded, the Dow had climbed all the way back to an essentially breakeven position. But when the market could not go positive, at least on the Dow, the sellers massed again, and by 1:00 PM (EST), the Dow was off by just over 400 points, with the health care group leading the way lower.

That said, the latest market drop, while concentrated in the blue chips, was broad, with all the key groups save for the utility sector lower, while the Big Board showed almost three times as many losers as winners.

In all, as the afternoon moves along, the Dow is now off 480 points, to just over 25,000 and the NASDAQ is now off 86 points. - Harvey S. Katz, CFA

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

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Before The Bell - For the first time in quite some time, the bears were in control of trading for a five-day stretch. Indeed, last week’s trading on Wall Street was the worst weekly performance for the Dow Jones Industrial Average and the S&P 500 Index in more than two years, with the former index shedding some 1,096 points during the five-day stretch. The tech-heavy NASDAQ did not fare any better, with some notable selloffs among the giant tech stocks, including Apple (AAPL - Free Apple Stock Report) and Alphabet (GOOG), leading the sizable move to the downside. For the day, the Dow 30, NASDAQ, and S&P 500 Index were down 666, 145, and 60 points, respectively.

Although the U.S. economic news continued to be encouraging—the nation added 200,000 jobs in January and the previous-month figures were revised higher—investors were unnerved by increasing inflation concerns. That feeling was stoked by the recent sharp rise in nonfarm payroll wages (up 2.9% over the last month), the Federal Reserve’s more-hawkish-than-expected monetary policy statement last Wednesday afternoon, and the central bank’s need to work down its massive (more than $4 trillion) balance sheet. The thought now is that the central bank may tighten the monetary reins four times instead of the previously estimated three in 2018. The resultant rise in bond yields, which has been significant over the last fortnight, weighed heavily on the stock market last week. In a nutshell, investors are worried the era of easy money may be coming to an end.

On a sector specific basis, it was an ugly looking day on Friday. All of the 10 major equity groups, including the defensive-oriented areas, finished deep in the red.  The biggest laggards were the energy, basic materials, and technology groups. The strength of the U.S. dollar, which makes commodities more expensively priced in international markets, and disappointing earnings from two energy titans Friday (see below) pressured the energy and basic materials stocks, while lackluster earnings news from a few tech giants was the primary culprit behind the tech selloff late last week. 

In addition, the news from Corporate America last week proved to be not as supportive as market pundits thought it would be after a nice start to the first-quarter earnings season. Investors need not look any farther than at Friday’s batch of earnings reports. Specifically, energy giants Exxon Mobil (XOM - Free Exxon Mobil Stock Report) and Chevron (CVX - Free Chevron Stock Report) reported disappointing conclusions to 2017, and their stock traded markedly lower in the down tape. Likewise, shares of Apple, Alphabet, and Amazon (AMZN) weighed on the technology sector, which was the linchpin in the phenomenal bull run in 2017. Looking ahead to the week at hand, the earnings reports will continue to flow in, with few Dow-30 reports on the docket, including the latest quarterly results from entertainment giant Walt Disney (DIS - Free Disney Stock Report) after tomorrow’s closing bell.

As noted above, the U.S, economy continues to strengthen.  In addition to Friday’s strong report on jobs creation, investors received some terrific news on manufacturing activity on Thursday morning. The economy should also get a boost from the implementation of the Tax Cuts and Jobs Act in the coming months. Investors should note that the Atlanta Federal Reserve released a report on Friday saying that first-quarter GDP growth could possibly surpass 5%. Although that report seems way too aggressive, it does speak volumes to about how pundits are feeling about the nation’s potential economic output. But as cited above, the strong economic data seem to be raising concerns that the Federal Reserve may step on the monetary brakes more forcefully in 2018 than most economists initially expected. Historically, periods of monetary tightening have not been well received by equity investors. Such an environment makes fixed-income investments more attractive, and certainly a more viable investment alternative to stocks than we have seen for nearly all of this decade.

Looking overseas this morning, the sight is not pretty either, as Friday’s sharp selloff on the homeland has moved across the pond. Overnight in Asia, most of the main indexes finished deep in negative territory, with a more than 2% decline for Japan’s Nikkei. (China's Shanghai index bucked the trend, moving higher on a strong economic report for the local economy.) Likewise, the selling is very pronounced so far today on the Continent, with the major European bourses sporting deep losses. The inflation concerns also are spooking the international equity markets. 

With less than an hour to go before the commencement of the new trading week this morning, it is amazing how things have changed in one week. At this time last Monday, the major U.S. equity indexes were sitting at or near record highs. Now, the futures are indicating another sharp selloff at the outset of trading, extending Friday’s hefty losses. The question now for investors is if this selling the haircut this overextended market needed or is it the start of an extended move to the downside. With market valuations stretched, disappointing news is likely to bring out the sellers—and that is what we have certainly seen in recent trading sessions. Investors are clearly worried about inflation and rising bond yields, with the S&P 500 Volatility Index (or VIX), also known as the “fear gauge,” climbing a whopping 43% on Friday—and pointing upward again today. Stay tuned.   - William G. Ferguson

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