Friday, December 28, 2012

Lower markets as the fiscal cliff approaches

Dow dropped 49, decliners over advancers 2-1 & NAZ fell 4.  The Financial Index slipped a fraction to the 219s.  The MLP index is up a fraction to the 379s (in what has been a very tough month) & the REIT index lost a fraction in the 266s.  Junk bond funds were mixed & Treasuries fluctuated.  Oil headed for the biggest weekly gain since Sep as lawmakers scheduled talks aimed at averting automatic tax increases & spending cuts.  Gold was lower.

AMJ (Alerian MLP Index tracking fund)

stock chart

CLG13.NYM...Crude Oil Feb 13...91.21 ...Up 0.34 (0.4%)

GCF13.CMX...Gold Jan 13......1,660.10 ...Down 2.60  (0.2%)

President Barack Obama

Photo:   Bloomberg

Obama summoned congressional leaders to a White House meeting 3 days before a year-end deadline to avoid $600B in spending cuts & tax increases as politicos gave little sign they intend to act together on a budget plan.  He will meet with Reps & Dems to see iff there is anythning they can do at the last minute.  Lawmakers disputed which party would be responsible for missing the deadline for a debt deal, a failure that could hurt the US credit rating & cause an economic recession.  The meeting will be held at 3PM.  “We’ll see what the president has to propose,” Sen McConnell said on the Senate floor yesterday.  “Hopefully there is still time for an agreement of some kind that saves the taxpayers from a wholly preventable economic crisis.”   In DC, pessimism was the prevailing mood as the deadline as the fiscal cliff approached.  The Rep led House called an unusual Sun session for the evening of Dec 30, though it's not clear say what action will be taken.  The meeting today is pure theater, so the pres appears to be in command & doing something. 

Obama Summons Congress Leaders as Budget Deadline Nears

A measure of Americans who signed contracts to buy homes increased last month to its highest level in 2½ years, the latest sign of improvement in the housing market.  The National Association of Realtors said that its pending home sales index rose 1.7% in Nov from Oct to 106.4, the highest since Apr 2010, when a homebuyer tax credit caused a spike in sales.  After excluding those months when the tax credit was available, it's the best reading since Feb 2007.  The increase points to higher sales of previously occupied homes in the coming months.  There's generally a 1-2 month lag between a signed contract & a completed sale.  Home sales are on track to rise 10% this year to their highest level in 5 years, buoyed by ultra-low mortgage rates & steady job gains.  The combination of stronger demand & limited supply is pushing up home prices.  That could encourage more sellers to put their homes on the market because they can expect a better price.

Pending Sales of Existing U.S. Homes Climb for Third Month=

Home Depot’s Christmas in April Imperiled

Photo:   Bloomberg

Home Depot (HD), a Dow stock, & Lowe's (LOW) have the most at stake among retailers facing a dockworkers’ strike, with possible port closings cutting off shipments right before the lucrative gardening season.  HD is making plans in case 15K workers at ports from Maine to Texas go on strike.  About 45% of the commerce that flows in & out of the US goes thru East Coast ports, according to the National Retail Federation (NRF).  Retailers “would be hit far and wide from apparel to home goods to patio furniture to barbecues,” Jonathan Gold, the NRF’s VP for supply chain & customs policy, said.  “It is a major concern. At this point, we don’t anticipate a settlement.”  The International Longshoremen’s Association has vowed to walk out if a deal isn’t reached before the Dec 29 expiration of its contract with the US Maritime Alliance, whose members include container-carrier companies.  Talks broke down last week after 9 months of negotiations.  A strike would be the first at East Coast & Gulf Coast ports since 1977.

Home Depot’s Christmas in April Imperiled by Port Strike

The White House meeting later today is purely theater as will be the House session on Sun evening.  Both sides are dug in for a long fight & it's difficult to imagine a last minute decision that will solve $1T worth of problems.  Extending lower taxes for Social Security also needs to be settled.  As if that weren't enough, raising the debt ceiling is right behind solving this mess & that fight could get even uglier.  So far, stocks are taking all this uncertainty as just a minor annoyance.  If  buyers give up, the stock market could have a major decline.

Dow Jones Industrials

stock chart

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