Morning MoneyBeat: Valuations Take Back Seat to Market Breadth Worries

        By Kristen Scholer
        Morning MoneyBeat is the Journal's pre-market primer packed with market updates, insights and must-read news links. To receive this morning newsletter via email, click here: http://on.wsj.com/MoneyBeatUSSignup
        MARKET SNAP: At 06:00 a.m. ET, S&P 500 futures up 0.25%. Treasury yield higher at 2.26%. Nymex down 0.33% to $47.82; gold flat at $1096.60. In Europe, FTSE 100 up 0.49%, DAX up 0.27% and CAC up 0.32%. In Asia, Nikkei 225 down 0.13% and Hang Seng up 0.47%.
        WATCH FOR: 10 a.m. EDT. June Pending Home Sales. [Expected 1% vs. 0.9% in May.]; 2 p.m. EDT. Fed policy statement.
        THE BREAKFAST BRIEFING
        Move over valuation, there's a bigger worry in town: Market breadth.
        Stock investors have spent much of the past year fretting about valuations that reached decade-high levels. Now a deterioration in the number of stocks advancing is raising fresh concerns about the stability of the market.
        "Investor worries have shifted from valuation to breadth," wrote Dan Greenhaus, chief strategist at brokerage BTIG.
        As The Wall Street Journal reported Sunday, only a handful of large-cap companies have fueled market gains this year, the number of advancing to declining stocks is rolling over and last Monday nearly as many stocks in the S&P 500 hit one-year lows as one-year highs, according to Ned Davis Research.
        "We agree the thinning of market participation is something we need to pay careful attention to as many market tops are often accompanied by the deterioration of breadth," said JC O'Hara, chief market technician at FBN Securities.
        Mr. O'Hara notes that a third of the Russell 2000 stocks are 20% below their 52-week highs and that more stocks are in downtrends than uptrends for the broader Russell 3000.
        To be sure, a market driven by only a handful of stocks doesn't necessarily presage a steep pullback. But a widening divergence between gainers and losers adds itself to a laundry list of other obstacles facing stocks from global tumult to a looming rate rise to dismal corporate earnings.
        Still, the S&P 500 sits 1.8% from its May 21 record and has gone almost four years without witnessing a correction, a drop of 10% or more.
        Despite the lean leadership, Mr. O'Hara and Mr. Greenhaus remain constructive on the market.
        "Investor concerns appear to us to be well founded," said Mr. Greenhaus. "Whether these conditions make for a market 'top' is another question entirely. We still believe the expansion and bull market are not set to end with the first rate hike and, while fall turbulence may arise, our expectation is that a decline would be a buying opportunity."
        Morning MoneyBeat Daily Factoid: On this day in 1958, the National Aeronautics and Space Administration (NASA) was created.
        - By Kristen Scholer
        STOCKS TO WATCH
        MasterCard is projected to report second-quarter earnings of 85 cents a share, according to analysts surveyed by FactSet. The credit card company earned 80 cents a share a year earlier.
        Facebook is forecast to post second-quarter earnings of 47 cents a share, up from 42 cents a share a year ago.
        Humana is expected to post second-quarter earnings of $1.72 a share, down from $2.19 a share a year ago.
        Whole Foods Market Inc. is likely to report fiscal third-quarter earnings of 45 cents a share, up from 41 cents a share a year earlier.
        MUST READS (LINKS)
        Twitter Revenue Jumps by 61%: Twitter said second-quarter revenue grew 61%, a reassuring sign that its advertising business is working its way past a temporary hiccup.
        Janet Yellen's First 18 Months Running the Fed -- The Numbers: A year and a half in the life of Federal Reserve chiefs Janet Yellen and Ben Bernanke.
        Barclays Scraps Dividend Target Despite Rise in Profit: Barclays on Wednesday scrapped its dividend target to retain capital as part of a fresh effort by Executive Chairman John McFarlane to reshape the beleaguered British bank.
        GM, Ford, Flourish Out of the Limelight: Rising U.S. demand for pickup trucks and sport-utility vehicles, spurred by lower gasoline prices, is propelling domestic margins at General Motors and Ford Motor to levels more typical of German luxury car makers.
        Siemens, Bombardier in Talks on Train Merger : German industrial conglomerate Siemens is in talks to combine its rail unit with Canada-based Bombardier's train business, people familiar with the matter said.
        Solvay to Buy Cytec Industries for $5.5 Billion: Belgium-based chemicals company Solvay on Wednesday said it is buying U.S. counterpart Cytec Industries for $5.5 billion to boost its product offering.
        RBS to Raise $2.2 Billion From Citizens Stake Sale: Royal Bank of Scotland Group said Wednesday it plans to raise $2.2 billion from the sale of 86 million shares in Citizens Financial Group via a public offering.
        Global Markets Build on Gains : Global stock markets were steady following a slight rebound in Chinese equities, but trading volumes were expected to remain thin and investors cautious ahead of a policy statement from the U.S. Federal Reserve.
        Relistings of Chinese Tech Firms Are in Limbo: China's market rout has left in limbo many small technology companies that had planned to return home after listing in the U.S.
        Lawsuits Over Mergers? He Objects: Prof. Sean Griffith questions the value of the settlements often tied to mergers. Now, he is taking action.
        (END) Dow Jones Newswires

        July 29, 2015 06:22 ET (10:22 GMT)

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