Safe-haven stock plays, like the high-yielding utilities and telecoms, were the flavor of the day Monday, while investors pulled back from financials and tech.
The financial sector should be a highlight again Tuesday, as Bank of America's board meets on a new chief executive; bank executives speak before a Goldman Sachs conference, and influential bank analyst Meredith Whitney appears on CNBC's "Squawk Box." Investors are watching reports about Citigroup's and Wells Fargo's efforts to get out of the government TARP program. General Electric also holds a 2 p.m. investor meeting on its GE Capital unit.
There is a 1 p.m. auction of $40 billion auction in 3-year notes Tuesday. President Obama speaks on the economy at 11:25 a.m., and is expected to unveil his plan to create jobs. The NFIB's small business survey is released at 7:30 a.m.
Stocks finished Monday barely changed after a quiet up and down day. The Dow was up 1 at 10,390, and the S&P 500 slipped 2 to 1103. The Nasdaq was down 4 at 2189. Telecoms were the best performers, up 1.8 percent, followed by utilities, up 0.7 percent. The worst performers were financials, down 1.6 percent, followed by tech, off 0.5 percent.
FedEx , watched as an economic bellwether, could be a bright spot for stocks Tuesday, after it said late Monday it was raising its forecast for the November quarter. FedEx now expects to earn a profit of $1.10 per share, a 30 percent decline from last year, but much better than the $0.65 to $0.95 per share previously forecast. The company said its profits benefited from domestic overnight express and international priority services and that it was helped by by inventory restocking.
The dollar started the day higher, following through on Friday's firming trend on the better than expected jobs report. But by the New York close, the dollar gave up ground against the euro and a basket of currencies. The dollar finished up 0.2 percent at $1.4813 per euro.
Fed chairman Ben Bernanke prompted the dollar's move. In a midday speech, he once again waved on the risk trade, reassuring markets that the Fed has no plans to change its standing comment about keeping rates on hold for an "extended period." Bernanke was speaking before the Economic Club of Washington.
"He removed some of the support the dollar received post payrolls," said Deutsche Bank currency strategist Adam Boyton.
Traders have been debating whether the dollar's move higher Friday was the start of a trend or just a temporary event. Boyton said he believes the dollar rally will prove to be short-lived, and it will resume losing ground against the euro and yen.
"The key is getting 'extended period' out of the Fed's lexicon," Boyton said.
Later Monday, New York Fed President William Dudley reiterated the same message as Bernanke in a speech at Columbia University.
"The recession now appears to be over, but the economy is still weak and the unemployment rate is much too high," said Dudley. "These circumstances underpin the FOMC's commitment to keeping short-term rates exceptionally low for an extended period."
The dollar has been a key part of the tightly linked risk trade, where the greenback weakens and risk assets, like stocks and commodities, move higher on the prospects of a global economic recovery and extremely low U.S. rates. "He (Bernanke) just came out and reminded us that the Fed isn't going to do anything any time soon and that took some of the wind out of the dollar's sails," Boyton said.
"We're really back again in that world we were in before Friday. The value of Friday is it gave us an idea of what might happen next year. That will come back, but it won't come back until the Fed is starting to tighten," he said.
He said Bernanke actually covered no new ground Monday despite the market reaction. "Arguably, all the chairman did today was repeat the broader committee statement," said Boyton.
Steve Massocca, managing director at Wedbush Securities, has been expecting the "risk trade" to fade and says as it unwinds there could be selling in energy and metals. Energy stocks were about 0.3 percent lower Monday, while materials were just barely higher, up 0.1 percent.
Commodities were under selling pressure from the firmer dollar Monday. Gold, silver and copper were all lower on the day as was crude, down 2 percent at $73.93 per barrel. Gold fell $5.40 per troy ounce to $1163.40, after a big decline on Friday.
Many market pros have been pushing dividend stocks as a way to generate return, and there has been much coverage of the theme by the financial media. Massocca said those stocks remain compelling. "Verizon yields close to 7 percent. That's a big leg up on the year...it's been a wonderful year to own dividend stocks and I think there's still a ways to go there."
Some dividend paying names he likes and owns are liquefied natural gas plays, but he warns they move in tandem with oil prices. They include Targa , Copano Energy and MarkWest .
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