Update: Stocks head down again; too soon for bargains?

MARKET CLOSE: After rising earlier in the day, U.S. stocks fell again Tuesday, adding to losses last week and Monday. Dow-Jones 30 Industrials closed down 205 points at 15666, off 1.29%. Standard and Poor's 500 closed down 26 points, at 1868, down 1.35%.

Among stocks of local interest, Exelon dropped 7 percent and Pepco Holdings fell 16% after the Washington DC utilty regulator rejected their merger plan; multinational chemical maker FMC dropped 7% to $40.26, its lowest since 2012; multinational computer services provider Unisys fell to $12.93, its lowest since 2009. Nationally, Best Buy rose 13% on higher-than-expected sales.

EARLIER: U.S. stocks traded higher Tuesday, with the Dow-Jones 30 Industrials up more than 300 points in early trading and passing 16,000 again.

BEFORE THE MARKET: Is it time to "buy the dip" and pick up bargain-priced U.S. stocks? Shares here are poised to open a bit higher, after British and European markets rose a few percent this morning and China's Hang Seng index checked its fall. (Japan's Nikkei was down, after the yen reversed and shot higher -- an anomaly Janney's Guy LeBas attributes to "unwinding" some bad hedge fund currency bets that may put a few well-paid managers out of business.)

The past week's 10%+ U.S. market slip equals "opportunity," Daniel P. Wiener, publisher of the Independent Adviser for Vanguard Investors, tells clients this morning. In an article titled "An Argument for Buying the Dip," Wiener goes back 30+ years to track the 54 days when Vanguard's 500 Index fund "fell by 3.5% or more in a single day" (like it did Monday), and finds: 
- 45 occasions the market rose over the following 12 months (by an average 28%); and only
- 9 times the market fell over the next year (average 8% each time). (Many of these 12-month periods overlapped.)

This isn't science, just a pile of stats amid what was, after all, a generally rising market. But Wiener, who likes to needle Vanguard for its occasional contradictions or over-smooth marketing, on this important question is backing the Vanguard company line: "Just sticking with a well-thought-out investment strategy in the face of large one-day declines, and the Chicken Little headlines that follow... (is) the rational choice to put some money to work in the market," Wiener concludes.

What to buy? Two analysts' suggestions, for what they are worth:

-- Ace Ltd.: Analyst Paul Newsome at Sandler O'Neill + Partners recommends increasingly dominant global insurer Ace, which is based in Switzerland to avoid U.S. taxes, has corporate offices in insurer-friendly Bermuda, is run by CEO Evan Greenberg from New York, and has its largest employment center (for now) in Philadelphia (where Ace is successor to the old Insurance Co. of North America).

Writes Newsome: "We are upgrading shares of Ace to BUY from HOLD," mostly because the stock, since the recent market decline, now trades at a discount to other big insurers. Newsome expects Ace will post returns-on-equity above 10% next year, a little higher than other insurers. "The company is in the process of acquiring Chubb in a transformational acquisition that sets it up to be a leading provider of property-casualty insurance globally." My note on the Chubb deal here.

Besides its relatively cheap price, Newsome adds, "We think the merger between Ace and Chubb will be successful...Ace is one of the few truly global insurance operations... Chubb brings to Ace a profitable middle market commercial business. It makes Ace the dominant player in professional liability insurance. It brings improved scale and makes it the dominant player in personal lines for high net worth individuals. The merger should also allow ACE to increase its earnings despite the soft insurance market. There are cost cutting efforts – often from Ace's side of the combined business – that are projected to be about $650 million." Which might not be good at all for Ace's Philadelphia operations.

-- StoneMor Partners LP, the Levittown, Bucks County-based cemetery operator, gets the 'Buy' recommendation from John Ransom, stock analyst at Raymond James & Associates: "Given the meaningful decline in StoneMor's share price since July 31 (down 21%), we are taking this opportunity to upgrade the stock to Strong Buy," he tells clients in a report this morning, "and reiterate our $32 price target," up from low $20s."

StoneMor has a long dividend record, a big cash pile and a lucrative marketing deal with the cash-strapped Archdiocese of Philadelphia, Ransom notes.

-- Small bank stocks: "We remain enthusiastic about the prospects of the community banking industry and see this pullback as an opportunity to buy quality banks at attractive prices," according to Ted Peters (CEO) and Jason O'Donnell (Chief Investment Officer) at Bluestone Financial Institutions Fund on the Main Line. They say banks in their sector are down 12% in the past month, but their own picks are down only "half" as much; with "little evidence to suggest a financial crisis" in the U.S., and both lending and credit quality reported strong, they are confident.