Tuesday, September 3, 2013

Markets crawl higher on growing MidEast tensions

Dow finished up 23 after going into red at lunchtime, advancers over decliners 5-4 & NAZ gained 22.  The MLP index fell 1+ to 435s & the REIT index lost 2+ to the 258s.  Junk bond funds inched higher & Treasuries fell the most in a month US manufacturing index rose more than forecast in Aug, reinforcing bets the Federal Reserve will soon announce plans to reduce monetary stimulus.  Oil advanced as the President sought support in Congress for a military strike on Syria, bolstering concern that oil shipments from the MidEast could be disrupted.  Gold gained for the first time in 4 sessions after Israel tested its missile-defense system, fueling concern that tensions in the MidEast which boosted the appeal of haven assets.

AMJ (Alerian MLP Index tracking fund)

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Treasury yields:

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CLV13.NYM...Crude Oil Oct 13....108.54 Up ...0.89 (0.8%)

Live 24 hours gold chart [Kitco Inc.]

Israeli Missile-Defense Test Sends Signal While Rattling Markets

Photo:   Bloomberg

Israel signaled its ability to defend itself with a missile-defense test over the Mediterranean Sea that briefly rattled stock & oil markets on edge over prospects for a US attack on Syria.  As the Obama administration presses Congress to authorize a military strike against Syria, Israel conducted what it called a joint test with the US of its Arrow Ballistic Missile Defense system.  The Israeli Defense Ministry called it a success.  While the Pentagon said it gave only “technical assistance and support” to a “long-planned” test, Israeli Prime Minister Netanyahu said the exercise showed “to anyone who is thinking to attack us -- it’s not worthwhile.”  Netanyahu said the test demonstrated that Israel’s defense is built on an “iron wall, iron dome and iron will.”  “These are the things that give us the strength to defend ourselves, and to anyone who is thinking to attack us - it’s not worthwhile,” Netanyahu said.  The demonstration of Israeli preparedness served as a signal to Syria & to Iran, & dramatized the potential for a regional spillover of a US led offensive against Syria’s chemical weapons capability.  The Israeli Defense Ministry said that “all elements of the system performed according to their operational configuration.”  A lot of people in the MidEast are very tense.

Israel Missile-Defense Test Sends Signal, Rattles Markets

Obama Gets Boehner’s Support in ‘Call to Action’ Against Syria

Photo:   Bloomberg

The President urged Congress to take a “prompt” vote authorizing military action against Syria & won endorsement for the cause from the 2 top Reps in the House.  Backing from House Speaker John Boehner & Majority Leader Eric Cantor will help Obama as he makes his case to lawmakers who’ve questioned the evidence presented that the Syrian gov was behind a sarin gas attack last month or whether the US has a vital interest in the region.  “The use of these weapons has to be responded to, and only the U.S. has the capability,” Boehner said after a White House meeting.  “I’m going to support the president's call for action and I believe my colleagues should support this call for action.”  Cantor released a separate statement of support & House Democratic leader Nancy Pelosi also said she’ll back Obama, giving it a bipartisan cast.  While no president has ever been turned down by Congress when asking to use military force, opposition to Obama’s Syria strike plan crosses party & regional lines.  Illustrating the complexity of Obama’s task in persuading lawmakers, the statements of support from the leaders after the morning meeting reflected different views on what the US should do. 

Verizon, a Dow stock, will probably issue $40-$50B of bonds to help finance its purchase of Vodafone’s 45% stake in Verizon Wireless.  A first offering may exceed Apple's (AAPL) record $17B issue in Apr.  Along with borrowing in dollars, VZ also plans to sell notes in £s & €s which surpass an earlier estimate of as much as $30B in bonds being offered.  The $130B transaction would give VZ full control of the most profitable US mobile-phone carrier.  Major banks are supplying a $61B bridge credit facility, which VZ plans to reduce “with the issuance of permanent financing,” VZ said.  VZ expects to maintain finances that are consistent with investment-grade credit.  Moody’s lowered its rank one level yesterday to Baa1, 3 levels above speculative grade, to reflect an increase in leverage, & S&P cut its rating to an equivalent BBB+.  The stock fell 1.37.

Verizon Said to Plan Up to $50 Billion of Bonds for Mobile Unit

Verizon (VZ)

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Traders are watching DC to see if there will be a strike against Syria.  For the time being, Big Ben is not center stage.  But next week he will be back in focus as the Sep FOMC meeting approaches.  Yield sensitive securities (MLPS, REITs, munis, etc) are continuing to sell off in anticipation of a change in the bond buying program by the Federal Reserve.  The jobs report on Fri will be an important part of any decision.

Dow Jones Industrials

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