After 4 Days of Declines, Is the Rally Over?

Markets are providing few hints this morning at the ultimate direction today's trading will take, with futures markets on both the Dow Jones Industrial Average (INDEX: ^DJI) and S&P 500 (INDEX: ^GSPC) essentially flat as of this writing.

Yesterday's 115-point fall for the Dow marked its biggest drop since July 20 and brought the blue-chip index's losing streak to four straight days. Looking to industry-specific performance, which is best done using the broader S&P 500 index, defensive sectors earned their stripes yesterday, with sectors like health care and telecom services falling 0.13% and 0.35% versus the aggregate index's 0.81% fall. The notable exception to this was the utilities sector, which fell 1%, making it the second-worst performer ahead of only the highly cyclical materials sector's 1.7% drop.

Movers and shakers
Turning to individual stocks, the biggest underperformer in the S&P was retailer Big Lots (NYS: BIG) , which fell more than 20% following a disappointing earnings report. The company provided a sharply lowered full-year outlook, with same-store sales forecast to fall for the remainder of the year and margins expected to compress due to increasing markdowns on merchandise. For the Dow, Hewlett-Packard (NYS: HPQ) led all components lower after poor results and no hint of a near-term turnaround by CEO Meg Whitman. Whitman said the company is "still in the early stages of a multi-year turnaround," assisting the stock in its 8.1% plummet.

Looking to some of the biggest movers overnight, shares of S&P component Autodesk (NAS: ADSK) are slated to open about 20% lower this morning following a poor quarterly report. The design software company only slightly missed expectations for earnings per share, posting $0.48 versus expectations for $0.49. The real trouble came with all-important guidance, which was lowered on both the top and bottom lines below previous targets. The company also discussed restructuring plans, as it lowers headcount and cuts discretionary costs in response to tepid business trends.

Foolish bottom line
After a week filled with losses, it appears the massive rally off of June lows may be sputtering to an end. But does that mean you should categorically rule out stocks at this juncture? Caution is certainly warranted in certain instances, but the best investors find opportunity in a sell-off, picking up shares of great businesses at discounted prices.

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