Market Talk

US stocks close down, but finish well off their session lows, as bank shares suffered amid concerns about a broad insider-trading probe.

DJIA, which dropped as much as 149 points, finished off 25 (0.2%) at 11179, its first decline in three days. S&P 500 falls 2 (0.2%) to 1198. Financials lead the drop, but tech and consumer discretionary finished in positive territory, muting the index’s overall losses. Nasdaq Comp gains 14 (0.6%) at 2532, its fourth-straight gain.

WSJ reports FBI raided three hedge funds amid its insider-trading investigation, which added to jitters surrounding financial sector. Ireland agrees to bailout package, but worries intensify about rest of euro-zone’s mounting debt.

Something else to consider — David Rosenberg offers his latest gloom-and-doom warning. Dow Jones’s Min Zeng reports:

US economic growth will be “extremely disappointing” in 2011, with risks of deflation. Rosenberg, chief economist at Gluskin Sheff, argues the US has passed the peaks of the economic cycle and fiscal stimulus and noted there are fresh headwinds ahead. He says safe-haven Treasury bonds provide better value than US stocks, and especially favors 30-year Treasurys. He highlights the spending cuts from state and municipal governments, the second-largest contributor to US gross domestic product after consumer spending. Rosenberg expects the 30-year bond’s yield to fall to 2.5% to 2.75% by the end of 2011.

Meanwhile, Dow Jones reporter Kristina Peterson explains why stocks ended mixed, with bank stocks dragging down the Dow, while the Nasdaq moved higher. Check her News Hub segment here:

US stocks suffer their biggest drop in more than three months and fall to lowest close since Oct. 19. Fears over a slowdown in Chinese economic growth, European sovereign-debt woes and criticism of Fed’s QE2 hit market hard.

DJIA drops 178 (1.6%) to 11024, its third decline in last four sessions and 12th largest drop of the year. Travelers and Alcoa lead blue chips lower. S&P 500 falls 19 (1.6%) to 1178 and Nasdaq Comp declines 44 (1.8%) to 2470.

S&P 500 is down 4% since hitting fresh 52-week high earlier this month. The move was delayed for a few days, but the sell-on-the-news reaction to QE2 appears to have picked up steam throughout last few sessions.

Two multibillion-dollar deals were announced in the hot mining and data-storage sectors, while better-than-expected retail sales are boosting stocks. Watch Donna Kardos Yesalavich, George Stahl and I break it down on the Markets Hub:

US stocks last week suffered their worst weekly performance since Aug 13. But the poor showing doesn’t necessarily mean the rally’s over. My “Technically Speaking” column (subscription required) today looks at how stocks have historically performed following double-digit percentage pullbacks:

If history is any indication, last week’s declines shouldn’t prompt investors to kiss this rally goodbye.

The Standard & Poor’s 500-stock index shed 2.2% last week, ending a string of five consecutive weekly gains. Yet the weekly drop came after a four-month rally for the broad index in which it completely retraced its 16% price correction from late April to early July.

That may seem like a quick run-up, especially since the bulk of those gains occurred in September and October. But historically it’s right on par with other recoveries following double-digit percentage pullbacks.

Sam Stovall, chief investment strategist at S&P, said the S&P 500 has experienced 18 corrections — considered declines of 10% to 20% — since 1946. On average, those corrections required only four months before the index was able to return to break even, meaning the current rally is on target with previous recovery rallies.

Once those corrections returned to break-even levels, the index went on to average an additional 10% gain in the following four months before encountering at least a 5% pullback, according to Stovall.

“Obviously, some recoveries made it no further than breakeven, such as in 1955 and 1997,” he wrote in a note to clients. “Still others just kept going, and going, and going, such as in 1954, 1961, 1976 and 2003, when all lasted more than 250 additional calendar days.”

The S&P 500 topped at 1227 on Nov. 5 before retreating last week. But the declines shouldn’t shock anyone, especially considering the precipitous rally stocks have endured throughout the last few months.

“You could say that the market [was] just catching its breath after eclipsing its April high, like a marathon runner who slumps in exhaustion after crossing the finish line,” Stovall said. “Yet if history is any guide, for it’s never gospel, this market advance has further to run before succumbing to another meaningful decline.”…

Check the rest of the column here.

The Dow dropped more than 100 within the first few minutes of trading and has basically lingered around that area all day long. Cisco’s the main driver after the tech bellwether offered a disappointing revenue outlook, citing lower spending from government agencies and weaker orders from U.S. cable operators. Whether this is selloff is a one-time thing or the start of a new trend remains to be seen. Kathleen Madigan, Joe Bel Bruno and I break it all down, and more, on The Markets Hub.

US stocks erase early losses and finish in positive territory despite continuing concerns about euro zone sovereign debt.

DJIA, which fell as much as 92 points, finishes up 10 (0.1%) at 11357, snapping two-day losing streak. S&P 500 rises 5 (0.4%) to 1219 and Nasdaq Comp jumps 16 (0.6%) to 2579.

Better-than-expected jobless claims and a sharp contraction in the US trade deficit did little to fuel stocks as worries across the pond persist. Bond markets in weaker European countries, such as Ireland, Portugal and Greece, were slammed as investors continued to demand higher yields. All this comes ahead of the highly-anticipated G-20 meeting, beginning tonight.

In after-hours trading, Cisco Systems dropped more than 4% despite solid FY1Q results. Dow Jones’ Roger Cheng reports investors were more interested in CEO John Chambers’ comments from the release, in which he said he is seeing capital spending moderate in some areas of the business. Wall Street had expected a more bullish tone after staying cautious with his macro comments last quarter.

It looks like the uncertainty is here to stay for a little while.

The euro, and in turn US stocks, reverse earlier losses after NY Fed unveils first QE2 buying schedule. Fed will buy $105B Treasurys over the next month; $75B tied to QE2, $30B to MBS reinvestments. The euro jumped once the details of the Fed’s Treasury purchases were released. And like clockwork, stocks followed the euro. DJIA, which was earlier down as much as 92 points, turned positive shortly after the QE2 details were announced.

Dow Jones reporter Andrew Johnson recently filed this snip to the wire version of Market Talk:

EUR/USD trades up following release of Fed bond buying data, reminding investors of QE, says Steven Englander of Citi. “There are these two huge forces in the market right now, and one of them is quantitative easing,” he says. “The other is the euro zone’s sovereign debt crisis. It’s random as to which dominates the market at one time,” during extremely volatile trading this first part of the week, says Englander. But investors turned back to QE Wednesday afternoon, even if details of the plan were not surprising, he says.

It’s as simple as that. Either QE2 or euro zone debt worries are the two main market forces right now. Based on the last few months of action, it’s obvious QE2 has dominated the conversation. But the QE2 chatter gave way to euro zone worries earlier this week. Is that the beginning of a new trend, or is this afternoon’s action proving investors will be able to keep riding the QE train in the future?

Back in September and October stocks were surging no matter what the major headlines or economic data looked like. Our Newswires colleague Donna Kardos Yesalavich even penned a column headlined “For Stocks, Bad Economic News Could Be God In Face Of QE2.” Here’s an excerpt from her Oct. 7 column:

On Wall Street, bad may be the new good when it comes to economic data.

Investors believe a weak September jobs report Friday from the Labor Department wouldn’t necessarily be unwelcome. In a twist of logic, negative economic snapshots could lift stocks on hopes central banks might unleash additional stimulus more quickly.

The expectation is that the Federal Reserve, the Bank of England and perhaps the Bank of Japan might embark on a second round of quantitative easing — dubbed by investors as “QE2″ — to keep the recovery going. That means Wall Street has been viewing every negative economic report as another reason to snap up stocks.

“It’s almost a win-win situation for equities,” said Owen Fitzpatrick, head of the equity strategy group at Deutsche Bank Private Wealth Management. “That seems like the environment we’ve been trading in for all of September and to some extent October.”

The S&P 500 went on to post a whopping 17% gain from the end of August through the beginning of November. But after a few slow days in the market, we can’t help but wonder if the opposite effect of the “bad news is good news” theory is starting to take place?

After hitting fresh two-year highs, US stocks have stalled out and are on pace for their third straight day of declines. Yesterday marked the DJIA and S&P 500′s biggest declines in three weeks and stocks are slumping again today. Today’s decline comes on the heels of dropping jobless claims and a narrower trade deficit, which are positive signals for the weak economy.

Falling imports from China and exports rising to a two-year high on the back of a weaker dollar helped shrink the total US deficit more than expected. And jobless claims decreased by 24,000 to 435,000 in the week ended Nov. 6, the lowest in four months. That positive report comes after last Friday’s much better than expected monthly jobs report, which showed 151,000 jobs were added in October.

Yet the stock market is overlooking the positive data and trading lower. Granted, the market could merely be taking a breather after its precipitous rise. But it’s never too early to start wondering if investors are starting to view good news as bad news, especially in light of the Fed’s QE2 announcement last week.

If the economy starts improving much more than anticipated, the central bank may not feel the need to go through with all of its $600B stimulus plan, which would be bad for stocks. The Fed may also be growing more hesitant as the global backlash against QE2 keeps mounting.

“Just a few trading sessions after the Fed announced the launch of QE2, strategists are already arguing that this program’s days may be numbered,” Josh Lipton writes at Minyanville, “The good ship QE2 has only just set sail but already some are forecasting an early return to economic harbor.”

Is good news becoming the new bad? Time will tell.

Lots to discuss on this morning’s News Hub. I have a small markets segment where I mainly discuss GM’s $2 billion 3Q profit ahead of its IPO next week. Additionally, discussion surrounds the debate regarding a return to the gold standard. And there are several problems banks are having restarting the foreclosure process. Check it all out at The News Hub.

Stocks posting modest gains premarket following yesterday’s biggest drop in three weeks. Yesterday’s selloff not terribly surprising considering equities have essentially gone straight up for weeks. Many consider a modest pullback healthy at this stage.

Still, commodity prices continue to surge, inflation jitters are heating up and concerns about eurozone sovereign debt are making a comeback.

On the economic front, jobless drop 24,000 to 435,000, much better than anticipated the lowest reading in four months. The U.S. trade imbalance — a main concern among G-20 members — narrowed in September, as gaps with China and other major trading partners fell amid a decline in overall imports. US exports hit their highest level in a little more than two years, boosted by record-high services sexports.

USD index strengthening, recently up 0.6%. S&P 500 futures up 1.9, 10-yr note down, yield at 2.71%.