Tuesday, December 18, 2012

Higher markets on fiscal cliff optimism

Dow surged 115, advancers ahead of decliners 5-2 & NAZ jumped 43.  The Financial Index had another good day, rising 2 to the 221s.  The MLP index rose a huge 4+ to the 384s (after falling 18 in Dec) & the REIT index was up 2 to the 264s.  Junk bond funds continued higher & Treasuries sank to a 7 week low.  Oil climbed on signs an agreement will be reached on the US budget & gold dropped to the lowest in more than 3 months as signs that US lawmakers may be closer to a budget deal boosted equities & reduced demand for alternative assets.

AMJ (Alerian MLP Index tracking fund)

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CLF13.NYM...Crude Oil Jan 13...88.02 ...Up 0.82 (0.9%)

Live 24 hours gold chart [Kitco Inc.]

Obama Concessions Signal Potential Bipartisan Budget Deal

Photos:   Bloomberg

John Boehner said he will push a budget “plan B” measure that will include tax increases on income of more than $1M a year, while he continues to negotiate with the president.  “It’s important that we protect as many American taxpayers as we can,” he said today.  “Our Plan B would protect American taxpayers who make $1 million or less.”  Boehner said he still hopes to reach a broader budget deal with the president.  The speaker expects the legislation to be on the House floor by the end of the week, & that may include other measures such as the estate tax & curbing the expansion of the alternative-minimum tax.  But the administration said Boehner’s plan “seems like folly.”  Fewer than 2 weeks remain to avert more than $600B in automatic spending cuts & tax increases set to start in Jan.  Boehner’s decision to set up a 2nd legislative track complicates the situation, which had been focused on the intensifying talks between the speaker & the president.  It looks like both sides will not get serious anytime soon.

Current-Account Deficit in U.S. Narrowed 9% in Third Quarter

Photo:   Bloomberg

The current-account deficit in the US narrowed in Q3, helped by slowing imports.  The gap, the broadest measure of intl trade because it includes income payments & gov transfers, shrank 9% to $107.5B, the smallest in almost 2 years, from a $118B shortfall in Q2, according to the Commerce Dept.  The forecast called for the deficit to narrow to $103B.  Cooling demand in the world’s largest economy is limiting imports at the same time that a slowdown in growth from Europe & China reduces overseas sales, a sign it’ll get harder to keep shrinking the trade deficit.  The balance of payments gap also is a reminder the US remains dependent on foreign investors for funding.  The gap represented 2.7% of GDP, the smallest in 3 years & down from 3% in Q3.  The deficit reached a record high of 6.5% of GDP in Q4 of 2005.  More recent figures indicate the current account balance may help underpin the economy in Q4.  Adjusted for prices, which are the figures used to calculate GDP, the trade gap shrank to $46.2B in Oct from $46.6B in Sep.

Current-Account Deficit in U.S. Narrowed 9% in Third Quarter

Greek Credit Rating Raised at S&P After Debt Buyback

Photo:   Bloomberg

S&P raised the Greek credit rating after a debt buyback as the ratings company cited the “strong determination” of euro-area govs to keep the nation in the euro zone.  The grade was lifted from selective default to B- with a stable outlook, S&P said.  It was cut to SD from CCC on Dec 5 amid the buyback.  The new grade is the highest Greece has had at S&P since Jun 2011, when it was cut to CCC from B.  “The stable outlook balances our view of euro zone member states’ determination to support Greece’s euro zone membership and the Greek government’s commitment to a fiscal and structural adjustment against the economic and political challenges of doing so,” the ratings company said.  European officials last week approved the payout of €49.1B ($65B) of loans thru Mar from Greece’s bailout programs with the EU & IMF after receiving the results of the Greek bond buyback program.  Under the plan, Greece agreed to pay €11.3B to buy back €32 B of bonds, reducing its debt burden.  “Even after the buyback, Greece’s end-2012 net debt-to-GDP ratio of over 160 percent of GDP remains onerous,” S&P said.  “Nevertheless, subject to Greece meeting program conditions, euro zone member states have said they would significantly improve official lending terms to the government.”  A minor victory in a long running drama.

Greece’s Credit Rating Is Raised to B- by S&P After Debt-Buyback Program

Markets are feeling good & that is bringing out buyers.  The oversold MLP index rebounded significantly.  With the fiscal cliff deadline nearing, there is a feeling DC will throw more money at the markets.  Maybe, maybe not.  The pres thinks he has total command of the situation.  But I don't see the debate making any progress, they will probably be spinning their wheels on Fri. 

Dow Jones Industrials

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