Tuesday, May 14, 2013

Dow surges to another record on hopes for the economy

Dow shot up 123, advancers over decliners almost 2-1 & NAZ was up 23. The MLP index dropped 1+ to the 459s but the REIT index rose 1+ to 310.  Junk bond funds were mixed & Treasuries continued weak with more selling.  Oil fell back as its advance to 100 stalled again & gold is trying to find a support base from which to advance.

AMJ (Alerian MLP Index Tracking fund)

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CLM13.NYM...Crude Oil Jun 13...94.11 Down ...1.06  (1.1%)

Live 24 hours gold chart [Kitco Inc.]

U.S. Deficit to Fall to $642 Billion, Federal Budget Agency Says

Photo:    Bloomberg

The budget deficit for the current year is projected to come in well below what was estimated just a few months ago.  The CBO cites higher tax revenues & better-than-expected bailout repayments by mortgage giants Fannie Mae & Freddie Mac as the key reasons for the improved outlook.  The budget office now predicts a 2013 budget deficit of $642B, more than $200B below its Feb estimate.  This year's shortfall would register at 4.0% of the economy, far less than the 10.1% experienced in 2009 when the gov ran a record $1.4T deficit.  Last year's deficit was $1.1T, capping 4 consecutive $T+ deficits during Obama's first term.  The deficit picture is expected to continue to improve next year & beyond, with the 2015 deficit now projected at $378B, just 2.1% of the economy.  All told, the budget office predicts deficits over the coming decade of $6.3T, down $522B from earlier projections.  This report could sap momentum from further deficit-cutting efforts.  One of the reasons for the burst of additional income tax revenues, is that upper-income taxpayers claimed more income late last year in order to avoid paying the higher tax rates enacted in Jan.  But that's non recurring.

U.S. Deficit to Fall to $642 Billion, Says Budget Agency

The Microsoft logo is seen at their offices in Bucharest March 20, 2013. REUTERS/Bogdan Cristel

Photo:    Bloomberg

The forthcoming update to the Microsoft, a Dow stock, computer operating system will be Windows 8.1, available later this year free to existing Windows 8 customers.  It has been touting the update, previously code-named 'Blue,' as a series of improvements to the Windows 8 software, launched last Oct, which has not been as popular as hoped.  100M licenses have been sold in the 6 months since launch, roughly in line with the previous version, but MSFT wants to combat sputtering interest in its flagship software with a substantial update to make it easier to use & compatible with smaller tablets.  "Windows 8.1 will be delivered as a free update to Windows 8 and to Windows RT and it will be easy to get right from the Windows start screen through the app store," said Tami Reller, head of finance & marketing at the Windows unit.  A preview version of Windows 8.1 will be made available at the start of the annual developer conference on Jun 26, Reller said, with the finished update released later this year.  The stock went up 73¢.

Microsoft (MSFT)

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Pentagon Said to Furlough Up to 650,000 Civilian Employees

Photo:   Bloomberg

The Pentagon will impose furloughs of 11 days starting Jul 8 on as many as 680K civilian employees in response to federal budget cuts, according to Defense Secretary Chuck Hagel.  The 11 days, 1 each week through Sep, is down from as many as 22 days initially projected & 14 days estimated more recently.  Hagel said he will reduce the number of days required, if possible, later in the year.  About 68K of 750K civilian Pentagon employees who are eligible for furloughs will be exempted, including 28K civilian workers at Navy shipyards who maintain vessels “because it would be particularly difficult to make up delays in maintenance work on nuclear vessels, and these vessels are critical to mission success.”  Employees involved in intelligence & in handling foreign arms sales also will be exempted, Hagel said.  The Pentagon estimates that it will need to cut $37B in the fiscal year that ends Sep 30, down from $41B previously projected in sequestration cuts, after the White House OMB completed recalculations based on the spending bill signed on Mar 26.

Hagel Sets Furloughs for 680,000 Workers Starting July 8

Money coming out of commodities & Treasuries is going into the stock market.  That sounds good, but it won't last especially with the economic recovery that is only getting mediocre grades.  Dow is up an amazing 2.1K this year & has risen a mind boggling 3.1K from its low last Jun.  Amateurs are chasing a rising market.  They don't know what they are doing & not committed.  If the markets take a stomach punch, that could bring significant selling.  The main thinking by the bulls today is, What can go wrong?  The answer, Plenty.  Dow has been closing at its daily highs for a few weeks.  Too much of a good thing is scary.

Dow Jones Industrials

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