Monday, September 30, 2013

Markets tumble on DC chaos

Dow dropped 98, decliners over advancers more than 3-1 & NAZ lost 12.  The MLP index fell 2+ to the 443s & the REIT index was off 2 to 269.  Jank bond funds sold off & even Treasuries were lower.  Oil dropped to the lowest level in almost 3 months on the threat of a gov shutdown that may reduce demand in the largest oil-consuming country.  Gold also saw selling as it languishes in the low 1300s.

AMJ (Alerian MLP Index tracking fund)

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CLX13.NYM...Crude Oil Nov 13...101.27 Down ...1.60  (1.6%)

GCV13.CMX...Gold Oct 13...1,325.30 Down ...13.10  (1.0%)

  • The morning sun illuminates the U.S. Capitol in Washington, Monday, Sept. 30, 2013, as the government teeters on the brink of a partial shutdown at midnight unless Congress can reach an agreement on funding. Congressional Republicans and Democrats spent Sunday trading the blame for failure to reach agreement on the stopgap funding bill. (AP Photo/J. Scott Applewhite)
Photo:   Yahoo

Hours before a threatened gov shutdown, the Senate has the next move on must-do budget legislation that has fueled a bitter congressional dispute over Obamacare.  But the Senate won't be riding to the rescue, at least not immediately.  When it convenes, the Dem led chamber is expected to reject the latest effort from House Reps to use a normally routine measure to attack Obamacare.  If no compromise can be reached by midnight, Americans would soon see the impact of a gov shutdown.  About 800K federal workers would be forced off the job without pay.  Some critical services such as patrolling the borders, inspecting meat & controlling air traffic would continue.  Social Security benefits would be sent, & the Medicare & Medicaid health care programs would continue to pay doctors & hospitals.  Senate rejection would send the measure back to the House, where Reps want to delay by a year key parts of the new health care law & repeal a tax on medical devices as the price for avoiding a shutdown.  A House GOP leader, Rep. Kevin McCarthy of California, said the House would rebuff the Senate's efforts to advance the short-term funding bill as a simple, "clean" measure shorn of anti-heath care reform provisions.

Obamacare dispute sends gov't to brink of shutdown Associated Press

Tire Factory

Photo:   Bloomberg

A Chinese manufacturing index rose less than forecast in Sep, unexpectedly weakening from a preliminary estimate in a result that casts doubt on the strength of the economy’s rebound.  The Purchasing Managers' Index from HSBC Holdings Plc & Markit Economics rose to 50.2 in Sep from 50.1 in Aug.  The final number was less than last week’s 51.2 preliminary reading & the 51.2 median estimate.  Premier Li Keqiang is trying to protect a targeted 7.5% expansion for 2013 as the Communist Party prepares for a meeting in Nov to set economic policy for coming years.  A Shanghai free-trade zone inaugurated yesterday, tax breaks & increased railway investment reflect efforts to restructure the economy, support growth & limit stimulus.  Li said that China’s economy is stabilizing & the nation can meet its main economic targets. 

China September Manufacturing Index Misses Preliminary Estimate

US business activity expanded more than forecast in Sep, reaching a 4-month high & adding to signs of a rebound in manufacturing.  The MNI Chicago Report business barometer rose to 55.7 from 53 in Aug (numbers greater than 50 signal expansion).  The forecast was 54.  Manufacturing (12% of the economy) is expanding as demand for automobiles, construction materials & appliances keeps assembly lines busy.  A pickup in business investment & overseas market improvement would help sustain gains & support economic growth into 2014.  The Chicago group’s gauge of new orders increased to 58.9, the highest since Feb, from 57.2 in Aug.  The production index jumped to 58, the highest since May, from 53 last month.  A measure of employment fell to a 5-month low of 53.2 from 54.9.

Chicago Index Increases in Sign U.S. Manufacturing Improving

This is shaping up as an ugly day in what could be an ugly week.  The chaos in DC is bad.  Matters could get worse with the dispute about raising the debt ceiling around the corner.  Around 11:30 PM, the politicos make get serious about a compromise (which would just reflect this & that taped together with Scotch Tape).  With DC so deeply divided, it is likely that these guys will be haggling tomorrow without a wimpy comprise.  Oct starts tomorrow & that is remembered for some the markets' ugliest days in history.

Dow Jones Industrials

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