Dow rose 58, advancers ahead of decliners 3-2 & NAZ lost 2. The Financial Index slipped a fraction in the 231s. The MLP index was off a fraction in the 423s & the REIT index rebounded, up 1+ to the 276s. Junk bond funds were mixed & Treasuries rose, bringing the yield on the 10 year Treasury well below 1.9%. Oil slipped again, but gold rocketed ahead 20, going over 1600.
AMJ (Alerian MLP Index tracking fund)
Democratic Party Leader Pier Luigi Bersani
Photo: Bloomberg
Italian party big wigs began jockeying to forge a coalition of rivals to head off a 2nd vote as a political vacuum of at least a month loomed, threatening to whipsaw financial market. In the aftermath of an inconclusive election, Democratic Party leader Bersani & resurgent ex-Premier Berlusconi may be seeking to avoid a ballot that would favor populist Beppe Grillo, whose movement was the top vote-getter in its first national contest. No formal steps can be taken until a new parliament convenes Mar15 (the Ides of March). Italian bonds & stocks tumbled as the election triggered renewed market concerns over Europe’s debt crisis. 10-year Italian bonds fell, sending the yield up 33 basis points to a 3-month high of 4.83% & the FTSE MIB stock index tumbled 4.3%. Bargaining began before the results were final last night. Bersani’s ally Nichi Vendola said talks with Grillo’s movement were “necessary.” Bersani, leader of the Democratic Party, claimed the mandate to form a gov. Berlusconi, who conceded in a radio interview earlier today, dismissed new elections as not “useful.” More uncertainty is not good for the markets.
Italy Confronts Vacuum as Leaders Seek to Avoid Election
Photo: Bloomberg
While the pres warns of the dire economic impact from across-the-board budget cuts, the nation may face more serious fiscal debates in the months ahead on a potential gov shutdown & renegotiation of the debt ceiling. These issues have not gone away! With just 3 days before the $85B in reductions are scheduled to start, Obama & Reps led by John Boehner yesterday traded blame again for the impasse. The pres & his cabinet officers drew a landscape of lost jobs, long lines at airports, delays at ports & cutbacks at popular national parks. Yet most of the impact of the cuts, known as sequestration, wouldn’t be felt until weeks after the deadline, giving both sides more time to strike a deal. But there’s been no public sign of negotiations. As the administration continued laying out details of how programs used by many Americans would be curtailed, Rep governors joined their congressional delegations in accusing Obama of overplaying his hand. This remains dead in the water.
Obama’s Warning on Automatic Cuts Obscures Threats Ahead
Photo: Bloomberg
Big Ben strongly defended the central bank's bond-buying stimulus before congress, saying its benefits clearly exceed possible costs. He also urged lawmakers to avoid sharp spending cuts set to go into effect on Fri, which he warned could combine with earlier tax increases to create a "significant headwind" for the economic recovery. Bernanke said the Federal Reserve (FED) is cognizant of potential risks from the extraordinary support for the economy, including the possibility the public loses confidence in the central bank's ability to unwind its stimulus smoothly or the potentially destabilizing effect of low rates on key markets. But he added these did not seem material at the moment, adding the FED has all the tools it needs to retreat from its monetary support in a timely fashion. "To this point, we do not see the potential costs of the increased risk-taking in some financial markets as outweighing the benefits of promoting a stronger economic recovery and more rapid job creation," Bernanke said. In unusually direct remarks on fiscal policy, Bernanke warned that the near-term spending cuts know as the sequester, which are set to take hold later this week, threaten an already challenged economic expansion. "The Congress and the administration should consider replacing the sharp, frontloaded spending cuts required by the sequestration, with policies that reduce the federal deficit more gradually in the near term but more substantially in the longer run," Bernanke said. "A substantial portion of the recent progress in lowering the deficit has been concentrated in near-term budget changes, which, taken together, could create a significant headwind for the economic recovery," he said. These are discouraging thoughts for potential stock buyers.
Bernanke Defends Asset Purchases as Benefits Outweigh Risks
Consumer confidence data was encouraging even though the Italian election stalemate weighs on euro markets & the fiscal mess in DC shows no sign of resolution. The immediate problem is $85B in cuts in the federal budget. The pres is going out of his way to tell horror stories about cutting federal spending by all of 2% (maybe 7% of discretionary spending). The worst part of this analysis is that there is no mention about cutting waste. Across the board cuts mean that waste is cut 7% just like agencies that provide useful services. The idea is if gov employers are pinched, punish the taxpayer. Dow started strong, but lost 50 in the last hour.
Dow Jones Industrials
AMJ (Alerian MLP Index tracking fund)
Treasury yields:
U.S. 3-month |
0.114% | |
U.S. 2-year |
0.244% | |
U.S. 10-year |
1.872% |
| CLJ13.NYM | ....Crude Oil Apr 13 | ...93.01 | ... 0.10 | (0.1%) |
| GCG13.CMX | ...Gold Feb 13 | .....1,589.00 | ... 2.80 | (0.2%) |
Democratic Party Leader Pier Luigi Bersani
Photo: Bloomberg
Italian party big wigs began jockeying to forge a coalition of rivals to head off a 2nd vote as a political vacuum of at least a month loomed, threatening to whipsaw financial market. In the aftermath of an inconclusive election, Democratic Party leader Bersani & resurgent ex-Premier Berlusconi may be seeking to avoid a ballot that would favor populist Beppe Grillo, whose movement was the top vote-getter in its first national contest. No formal steps can be taken until a new parliament convenes Mar15 (the Ides of March). Italian bonds & stocks tumbled as the election triggered renewed market concerns over Europe’s debt crisis. 10-year Italian bonds fell, sending the yield up 33 basis points to a 3-month high of 4.83% & the FTSE MIB stock index tumbled 4.3%. Bargaining began before the results were final last night. Bersani’s ally Nichi Vendola said talks with Grillo’s movement were “necessary.” Bersani, leader of the Democratic Party, claimed the mandate to form a gov. Berlusconi, who conceded in a radio interview earlier today, dismissed new elections as not “useful.” More uncertainty is not good for the markets.
Italy Confronts Vacuum as Leaders Seek to Avoid Election
Photo: Bloomberg
While the pres warns of the dire economic impact from across-the-board budget cuts, the nation may face more serious fiscal debates in the months ahead on a potential gov shutdown & renegotiation of the debt ceiling. These issues have not gone away! With just 3 days before the $85B in reductions are scheduled to start, Obama & Reps led by John Boehner yesterday traded blame again for the impasse. The pres & his cabinet officers drew a landscape of lost jobs, long lines at airports, delays at ports & cutbacks at popular national parks. Yet most of the impact of the cuts, known as sequestration, wouldn’t be felt until weeks after the deadline, giving both sides more time to strike a deal. But there’s been no public sign of negotiations. As the administration continued laying out details of how programs used by many Americans would be curtailed, Rep governors joined their congressional delegations in accusing Obama of overplaying his hand. This remains dead in the water.
Obama’s Warning on Automatic Cuts Obscures Threats Ahead
Photo: Bloomberg
Big Ben strongly defended the central bank's bond-buying stimulus before congress, saying its benefits clearly exceed possible costs. He also urged lawmakers to avoid sharp spending cuts set to go into effect on Fri, which he warned could combine with earlier tax increases to create a "significant headwind" for the economic recovery. Bernanke said the Federal Reserve (FED) is cognizant of potential risks from the extraordinary support for the economy, including the possibility the public loses confidence in the central bank's ability to unwind its stimulus smoothly or the potentially destabilizing effect of low rates on key markets. But he added these did not seem material at the moment, adding the FED has all the tools it needs to retreat from its monetary support in a timely fashion. "To this point, we do not see the potential costs of the increased risk-taking in some financial markets as outweighing the benefits of promoting a stronger economic recovery and more rapid job creation," Bernanke said. In unusually direct remarks on fiscal policy, Bernanke warned that the near-term spending cuts know as the sequester, which are set to take hold later this week, threaten an already challenged economic expansion. "The Congress and the administration should consider replacing the sharp, frontloaded spending cuts required by the sequestration, with policies that reduce the federal deficit more gradually in the near term but more substantially in the longer run," Bernanke said. "A substantial portion of the recent progress in lowering the deficit has been concentrated in near-term budget changes, which, taken together, could create a significant headwind for the economic recovery," he said. These are discouraging thoughts for potential stock buyers.
Bernanke Defends Asset Purchases as Benefits Outweigh Risks
Consumer confidence data was encouraging even though the Italian election stalemate weighs on euro markets & the fiscal mess in DC shows no sign of resolution. The immediate problem is $85B in cuts in the federal budget. The pres is going out of his way to tell horror stories about cutting federal spending by all of 2% (maybe 7% of discretionary spending). The worst part of this analysis is that there is no mention about cutting waste. Across the board cuts mean that waste is cut 7% just like agencies that provide useful services. The idea is if gov employers are pinched, punish the taxpayer. Dow started strong, but lost 50 in the last hour.
Dow Jones Industrials
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