MarketView for November 11

Summary

The major equity indexes moved a bit higher on Monday, lifting the Dow Jones Industrial Average to another record closing high in light volume on Veterans Day while investors once again became fascinated with the game of, “How soon will the Fed begin tapering.” It is as if when there is nothing else to worry about, then the Fed takes center ring.

The Fed's bond-buying stimulus program has been one of the primary reasons for this year's stocks rally as it has supported the economy and lured investors into riskier assets like equities. The S&P 500 is up 24 percent for the year so far.

Aiding the speculation was a robust October jobs report which rekindled expectations that the Fed may reduce its stimulus efforts sooner than expected. A Reuters’ survey showed that more U.S. primary dealers now expect the Fed to trim its $85 billion of monthly bond purchases before March.

The day's slight gains came on light volume, with both the government and the bond market closed for Veterans Day. The S&P 500 also came close to ending the session at a record high.

Among the S&P 500's biggest percentage gainers, Transocean gained 3.6 percent to close at $55.37 after the company said it reached an agreement with investor Carl Icahn in which the offshore driller will pay a dividend of $3 per share and reduce the number of board seats.

Twitter, which went public amid much fanfare last week, climbed 3 percent to $42.90.

The Nasdaq index, which has the strongest year-to-date gains of all the three major indexes, has been underperforming the broader market recently. While the Dow and the S&P 500 each posted a fifth week of gains on Friday, the Nasdaq registered a slight loss for the week.

After the bell, shares of News Corp fell 3.3 percent to $16.85. Rupert Murdoch's company reported a steeper-than-expected decline in revenue in its first quarter that it was split off from its more profitable entertainment business.

During Monday's regular session, large technology companies had the biggest negative impact on the Nasdaq, with Apple down 0.3 percent to close at $519.05.

Shares of ViroPharma were up 25.5 percent to $49.42 following news that London-listed Shire is buying the company for $4.2 billion, attracted by a pipeline of potentially lucrative drugs to treat rare diseases.

Many analysts fear that the market may be ripe for a pullback before the end of the year, especially if the Fed decides to begin reducing its stimulus as early as December. Until then, the trend may remain upward.

Morgan Stanley analysts said in a research note that a sooner-than-expected Fed tapering could hurt defensive shares, which outperformed in October.

Investors also will pay close attention this week to results from retailers, including Macy's and Wal-Mart, both of which are expected to report earnings increases. Macy's ended the day up 1.9 percent at $47.07, Wal-Mart was up 1.4 percent, closing at $79.01.

About 4.78 billion shares changed hands on the three major equity exchanges, a number that was below the five-day average closing volume of about 6.62 billion shares, according to BATS exchange data.