Friday, October 12, 2012

Markets waffle after first bank earnings reports

Dow was up all of 2, decliners ahead of advancers 2-1 & NAZ slipped 5.  The Financial Index dropped a fairly big 3+ to the 212s on less than satisfactory first bank earnings reports.  The MLP index was up pocket change while the REIT index fell a fraction.  Junk bond funds & Treasuries inched higher in this uncertain market.  Oil pulled back a little & gold was off $13.

AMJ (Alerian MLP Index tracking fund)

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CLG13.NYM...Crude Oil Feb 13...92.90 ...Down 0.57  (0.6%)

Live 24 hours gold chart [Kitco Inc.]

Bank of America Corp. Chief Executive Officer Brian T. Moynihan

Brian Moynihan
Photo:   Bloomberg  

The US is facing pressure to avoid running off its fiscal cliff amid warnings that failure to change course would trigger another global recession.  “People are concerned,” UK Chancellor of the Exchequer George Osborne said at the IMF annual meeting in Tokyo.  “There was quite a lot of discussion.”  The US will incur $100B in automatic spending cuts & more than $500B in expiring tax reductions in Jan, unless lawmakers strike a deal.  The IMF this week said such a consolidation would tighten fiscal policy by 4% of GDP, the most since the 1940s.  That’s powerful enough to ricochet around the world economy as a recovery from the 2009 recession already shows signs of weakening, said Canadian Finance Minister Jim Flaherty.  “It’s a very serious situation for all of North America and for the entire world,” Flaherty said on Bloomberg TV.  “It means we’ll all go into recession. So it’s important this gets dealt with.”  Failure to craft a solution “is not acceptable at all,” Bank of America (BAC), a Dow stock, CEO Brian Moynihan said.  “It’s important that it’s done sooner rather than later. We’ve been feeling it since last summer; to take that uncertainty away is key.”  Even US Treasury Secretary Tim Geithner said that he agreed a delay isn’t a “responsible” strategy & that any accord should allow for deficit reduction over time & open up room for shorter-term investment.  “We’re going to take a run at it,” he said.  But nothing will be done for a minimum of a month.  Then a divided congress is supposed to come up with a solution.  Can your spell, "duhh?"

Part of the problem is -->>  The federal budget deficit has topped $1T for a 4th straight year, but a modest improvement in economic growth helped narrow the gap by $207B compared with last year.  The Treasury said  that the deficit for the 2012 budget year totaled $1.1T.  Tax revenue rose 6.4% from last year to more than $2.4T, helping contain the deficit.  Revenue rose as more people got jobs & received income.  Corps also contributed more tax revenue than in 2011.  Spending fell 1.7% to $3.5T reflecting, in part, less defense spending as US military involvement in Iraq was winding down.  When Obama took office in 2009, the CBO forecast that the deficit for that year would total $1.2T & ended up at a record $1.41T.  The increase was due, in part, to higher spending to fight the worst recession in decades.  Tax cuts enacted under George Bush, along with wars, contributed to the deficits.  The budget gaps in 2010 & 2011 were slightly lower than the 2009 deficit as a gradually strengthening economy generated more tax revenue, but they still exceeded $1T.

Federal deficit tops $1 trillion for fourth year AP

Apple Said to Unveil Smaller iPad Tablet

Photo:   Bloomberg

Apple may unveil a smaller version of the iPad at an event next Tues.  This is called an unofficial leak by the company.  The new model will have a screen that’s 7-8" diagonally, less than the current 9.7" version.  A smaller, less expensive iPad could undercut the tablet ambitions of the competition.  The price for the mini will probably be $299 or $349.  Since the iPad went on sale in Apr 2010, it has dominated the tablet market, which is predicted to reach $63B this year & the iPad has 61% of the market.  This high flying stock was up a tepid 1+ to about 630 (also down 75 from the recent high) on this semi official announcement.

Apple Said to Plan Oct. 23 Event to Unveil Smaller Model of IPad Tablet

Apple (AAPL)

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After reaching a new 4 year high, Dow pulled back almost 300 this week.  The first earnings reports did not inspire confidence in stock buyers.  Next week a broader range of companies will be reporting & it looks like those reports will get so-so grades at best.  The fiscal cliff & debt ceilings remain enormous problems & won't be touched until Dec at the earliest.  As a result, expansion plans are being put on hold.  But Dow is not concerned, at least so far.

Dow Jones Industrials

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