Thursday, December 27, 2012

Markets cut losses with late day rally

Dow lost 18, decliners slightly ahead of advancers & NAZ was down 4.  Banks stock improved in the PM, cutting the loss for the Financial Index to a fraction, just above 220.  MLPs continued weak, with the index dropping another 2+ to the 378s & the REIT index inched up a fraction in the 266s.  Junk bond funds were sold & Treasuries rose from the uncertainty coming out of DC.  Oil & gold were marginally higher as these markets followed the goings on in DC.

AMJ (Alerian MLP Index tracking fund)

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CLG13.NYM...Crude Oil Feb 13...90.79 ...Down 0.19  (0.2%)

Live 24 hours gold chart [Kitco Inc.]

McConnell Pushed Into U.S. Fiscal Fight as Deadline Nears

Photo:   Bloomberg

The Senate minority leader, Mitch McConnell, who has stayed largely outside the budget fight this year, will be thrust into prominence just 5 days before the deadline of tax increases & spending cuts.  After the House failed to act & the Treasury said it will start taking special measures now to avoid breaking the debt ceiling, McConnell’s next move may influence whether the $600B tax increases & spending cuts begin in Jan.  The pres is pressing for poiticos to craft an interim deal to avert the fiscal cliff.  Should Dems heed Obama’s call, McConnell will choose from 3 options: using his experience to help forge a bipartisan deal, wielding his power to block a proposal by Dem Majority Leader Harry Reid from reaching a vote or letting Dems advance their own plan without having to endorse it.  Whatever McConnell does, the House, which balked at the tax-rate increases for top earners, would still need to approve any measure the Senate passes.  McConnell has called on the Senate to consider changes to House-passed legislation that would extend the Bush-era tax cuts for all income levels.  He has argued that the Senate could try to alter that legislation to allow tax cuts to expire for top earners, as Dems advocate.  Political considerations are driving the final solution, very bad for the markets.

McConnell Pushed Into U.S. Fiscal Fight as Deadline Nears

New housing construction is seen in Poolesville, Maryland, October 23, 2012. REUTERS/Gary Cameron

Photo:   Yahoo

New single-family home sales accelerated in Nov to the fastest pace in 2½ years & median sales price jumped from the same month in 2011, signs that the housing recovery is gaining steam.  The Commerce Dept said sales climbed 4.4% last month to a 377K annual rate, in line with forecasts of 378K.  Data for new home sales are subject to substantial revisions as the Commerce Dept cut its estimate for sales in Oct by 7K to a 361K annual rate.  The annual sales pace for Nov was the quickest since Apr 2010.  This year, the housing sector has been point of strength in an economy beset by flagging business confidence and cooling demand abroad.  The median home price of a new home rose to $246K, up 14.9% from the same month in 2011.  However, the pace of new home sales is roughly a quarter of the all-time high in Jul 2005 when a housing bubble was still inflating.

New-Home Sales Climb to Highest Rate Since 2010 Reuters

Greek Bank Capital Needs at EU27.5 Billion, Bank of Greece Says

Photo:   Bloomberg

Greece's 4 largest banks need to boost their capital by €27½B ($36B) after taking losses from the country’s debt swap earlier this year, the largest sovereign restructuring in history. The biggest lender, needs to raise €9.8B.  The other 3 each need roughly €5-7B total recapitalization.  The total needs for the country’s banking sector amounts to €40½B.  This amount “is appropriate to cover the recapitalization and restructuring costs of the Greek banking sector,” the central bank said.  “It is expected to remain adequate under reasonable levels of economic uncertainty.”  The banks have received bridge recapitalization loans from the Hellenic Financial Stability Fund to raise their core tier one capital ratios to 9%, as required under the terms of the country’s bailout from the EU & IMF.  Recapitalization must be completed by the end of Apr, thru a combination of common equity & contingent convertible bonds.

Greece’s Biggest Banks Need to Boost Capital by $36.3 Billion After Swap

The Dow recovered about 150 in the last hour as hope springs eternal that manna will fall from heaven.  The House will convene Sun evening to resolve a budget impasse, Majority Leader Eric Cantor said.  Now all they have to do is come up with a plan to solve $1T of problems in a couple of hours & get it approved along with the senate & the pres.  Talk about last minute, this doesn't qualify since there is one more day before the new year starts.  Even if they come up with something, who knows how much good it will do?   Assuming there is some sort of agreement that vaguely passes muster, then they have to solve raising the debt ceiling.  That's what brought on this year's budget debate, last year's political debt ceiling increase compromise.  It's difficult to imagine a Scotch Tape approach to massive problems at the last minute will accomplish anything beyond giving a momentary sense of relief.  For what it's worth, following the late day rally there was a tiny bit of selling at the close.

Dow Jones Industrials

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