Dow lost 36, decliners over advancers 5-4 & NAZ was off 5. The Financial Index eased back a fraction in the 194s. The MLP index rose almost 1 to the 385s (a 2 month high) & the REIT Index was up fractionally in the 265s (near its yearly highs). Junk bond funds rose as did Treasuries. Oil rose for the first time in 3 days as a labor strike threatened to halt all offshore oil & gas production in Norway, Western Europe’s biggest exporter. Gold was also higher but remains sloshing around its yearly lows.
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The President called on Congress to extend tax cuts for only low & middle income earners (roughly the bottom 98%) while allowing taxes to increase for families that make more than $250K a year. "Let's not hold the vast majority of Americans and our economy hostage while we debate the merits of another tax cut for the wealthy," Obama said. He wants Congress to pass a one-year extension of the Bush-era tax cuts for households making less than $250K before they expire at the end of the year. He said the outcome of his Nov election contest would then determine the fate of the tax cuts for higher income earners. "My opponent will fight to keep them in place. I will fight to end them," he added. The White House spokesman said Obama "would not sign" a bill that extended the whole range of tax cuts in full. Romney supports extending the tax cuts for all income earners. His spokeswoman Andrea Saul said that Obama's proposal amounted to a "massive tax increase" & proved that the president "doesn't have a clue how to get America working again and help the middle class." The contours of the tax debate are largely the same as they were when the cuts were due to expire at the end of 2010. While Obama opposed an extension for higher income earners then as well, he ultimately agreed to full 2-year extension, in part to win concessions for other legislation. This is far from a done deal!
Obama Calls for Extending Middle-Income Tax Rates
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France had a successful bond auction today, but also got a warning from the president that growth so far this year is "nil" & that the country needs to rethink its social model. The gov sold €6B in short-term bonds at negative interest rates (debt holders will incur a slight loss at maturity), as investors flock to the perceived safety of Europe's larger economies. It was the first time rates entered negative territory according to the French Treasury. France's borrowing costs have been dropping in recent months as those in neighboring Spain have soared on increased fears that it will need a bailout. But France, with the #2 economy in Europe, has high debts of its own & 10% unemployment, & is struggling to avoid a new recession. "Everybody knows that in the first half of the year, growth will be nil. So we need to mobilize all our forces, all our imagination, all our capacities to achieve lasting growth for the years ahead," French President Francois Hollande said at a conference with labor & business leaders meant to lay the groundwork for new jobs policies. "My goal is to make our social model evolve to better guarantee" its future, Hollande said. "The time has come to put France on the move, and there is no time to lose." Among his proposals is a special new job contract under which employers would get tax breaks if they hire a young person & keep an older employee at the same time, instead of choosing one or the other. He has also said that companies who abuse temporary contracts instead of long-term contracts should have to pay more into the state unemployment system. This is another story explaining why the Euro zone economy is soggy in 2012.
French president: zero growth so far this year AP
Consumer credit climbed more than forecast in May, led by the biggest jump in credit-card debt in almost 5 years. The $17.1B increase is bigger than the highest estimate & the largest this year, following a $9.95B gain in the previous month (that was more than previously estimated), according to the Federal Reserve. Revolving credit, which includes credit card spending, rose by $8B, the most since Nov 2007. A pickup in borrowing coincides with a slowdown in hiring & declines in consumer confidence that indicate the job market is failing to spur big enough gains in wages to cover expenses. Employers added fewer workers to payrolls than forecast in Jun while the jobless rate stayed at 8.2%. Non-revolving debt, including educational loans & loans for motor vehicles & mobile homes, increased by $9.1B in May.
This was a quiet day ahead of earnings season with the 3 biggies weighing on the markets: Europe, China & US earnings. The proposal to extend tax cut for most is very touchy politically & probably will go nowhere until late in Dec. Tax uncertainty is an enormous negative holding back economic recovery. While Dow has had a nice bounce off its lows last month, it's back on defense.
Alcoa (AA) reported mediocre earnings after the markets closed. "Although aluminum prices are down, the fundamentals of the aluminum market remain sound with strong demand and tight supply," CEO Klaus Kleinfeld said. EPS, excluding items, was 6¢, down from 32¢ last year. Revenue fell 10% to $5.96B. Analysts had expected EPS excluding items of 5¢ on $5.81B in revenue. The stock was little changed after hours.
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Treasury yields:
U.S. 3-month | 0.071% | |
U.S. 2-year | 0.262% | |
U.S. 10-year | 1.510% |
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| CLQ12.NYM | ...Crude Oil Aug 12 | ...86.40 | ... 1.95 | (2.3%) |
The President called on Congress to extend tax cuts for only low & middle income earners (roughly the bottom 98%) while allowing taxes to increase for families that make more than $250K a year. "Let's not hold the vast majority of Americans and our economy hostage while we debate the merits of another tax cut for the wealthy," Obama said. He wants Congress to pass a one-year extension of the Bush-era tax cuts for households making less than $250K before they expire at the end of the year. He said the outcome of his Nov election contest would then determine the fate of the tax cuts for higher income earners. "My opponent will fight to keep them in place. I will fight to end them," he added. The White House spokesman said Obama "would not sign" a bill that extended the whole range of tax cuts in full. Romney supports extending the tax cuts for all income earners. His spokeswoman Andrea Saul said that Obama's proposal amounted to a "massive tax increase" & proved that the president "doesn't have a clue how to get America working again and help the middle class." The contours of the tax debate are largely the same as they were when the cuts were due to expire at the end of 2010. While Obama opposed an extension for higher income earners then as well, he ultimately agreed to full 2-year extension, in part to win concessions for other legislation. This is far from a done deal!
Obama Calls for Extending Middle-Income Tax Rates
France had a successful bond auction today, but also got a warning from the president that growth so far this year is "nil" & that the country needs to rethink its social model. The gov sold €6B in short-term bonds at negative interest rates (debt holders will incur a slight loss at maturity), as investors flock to the perceived safety of Europe's larger economies. It was the first time rates entered negative territory according to the French Treasury. France's borrowing costs have been dropping in recent months as those in neighboring Spain have soared on increased fears that it will need a bailout. But France, with the #2 economy in Europe, has high debts of its own & 10% unemployment, & is struggling to avoid a new recession. "Everybody knows that in the first half of the year, growth will be nil. So we need to mobilize all our forces, all our imagination, all our capacities to achieve lasting growth for the years ahead," French President Francois Hollande said at a conference with labor & business leaders meant to lay the groundwork for new jobs policies. "My goal is to make our social model evolve to better guarantee" its future, Hollande said. "The time has come to put France on the move, and there is no time to lose." Among his proposals is a special new job contract under which employers would get tax breaks if they hire a young person & keep an older employee at the same time, instead of choosing one or the other. He has also said that companies who abuse temporary contracts instead of long-term contracts should have to pay more into the state unemployment system. This is another story explaining why the Euro zone economy is soggy in 2012.
French president: zero growth so far this year AP
Consumer credit climbed more than forecast in May, led by the biggest jump in credit-card debt in almost 5 years. The $17.1B increase is bigger than the highest estimate & the largest this year, following a $9.95B gain in the previous month (that was more than previously estimated), according to the Federal Reserve. Revolving credit, which includes credit card spending, rose by $8B, the most since Nov 2007. A pickup in borrowing coincides with a slowdown in hiring & declines in consumer confidence that indicate the job market is failing to spur big enough gains in wages to cover expenses. Employers added fewer workers to payrolls than forecast in Jun while the jobless rate stayed at 8.2%. Non-revolving debt, including educational loans & loans for motor vehicles & mobile homes, increased by $9.1B in May.
This was a quiet day ahead of earnings season with the 3 biggies weighing on the markets: Europe, China & US earnings. The proposal to extend tax cut for most is very touchy politically & probably will go nowhere until late in Dec. Tax uncertainty is an enormous negative holding back economic recovery. While Dow has had a nice bounce off its lows last month, it's back on defense.
Alcoa (AA) reported mediocre earnings after the markets closed. "Although aluminum prices are down, the fundamentals of the aluminum market remain sound with strong demand and tight supply," CEO Klaus Kleinfeld said. EPS, excluding items, was 6¢, down from 32¢ last year. Revenue fell 10% to $5.96B. Analysts had expected EPS excluding items of 5¢ on $5.81B in revenue. The stock was little changed after hours.
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