Tuesday, October 1, 2013

Higher markets after partial government shutdown

Dow rose 58, advcancers over decliners 2-1 & NAZ went up a very big 30.  The MLP index jumped 3+ to 450 & the REIT index gained 3 to the 271s.  Junk bond funds were mixed & Treasuries pulled back, raising yields.  Oil fell for a 3rd day as the US gov began its first partial shutdown in 17 years, threatening to slow the economy & curb fuel use.  Gold plunged, taking it below 1300 (an important support level).

AMJ (Alerian MLP Index tracking fund)

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CLX13.NYM...Crude Oil Nov 13...101.74 Down .....0.59  (0.6%)

GCV13.CMX...Gold Oct 13........1,292.10 Down ...34.40  (2.6%)

Government Shutdown Begins as Congress Divides on Spending

Photo:   Bloomberg

The US gov began a partial shutdown for the first time in 17 years, potentially putting up to 1M workers on unpaid leave, closing national parks & stalling medical research projects.  Federal agencies were directed to cut back services after lawmakers could not break a political stalemate that sparked new questions about the ability of a deeply divided Congress to perform its most basic functions.  After House Reps floated a late offer to break the logjam, Senate Majority Leader Harry Reid rejected the idea, saying Dems would not enter into formal negotiations on spending "with a gun to our head" in the form of gov shutdowns.  In the hours leading up to the deadline, the Senate repeatedly stripped measures passed by the House that tied temporary funding for gov operations to delaying or scaling back Obamacare.  Shortly after midnight, the pres tweeted: "The Affordable Care Act is moving forward. You can't shut it down."  Political dysfunction in DC also raised fresh concerns about whether Congress can meet a crucial mid-Oct deadline to raise the $16.7T debt ceiling.  After missing the midnight deadline to avert the shutdown, Reps & Dems in the House continued a bitter blame game, each side shifting responsibility to the other in efforts to redirect a possible public backlash.

Government Shutdown Begins as Deadlocked Congress Flails

Airstream RV Manufacturing

Photo:   Bloomberg

US factory activity expanded last month at the fastest pace in 2½ years, a sign that manufacturing could lift economic growth & hiring in the coming months.  The Institute for Supply Management, a trade group of purchasing managers, says its manufacturing index rose in Sep to 56.2, the highest since Apr 2011.  That's up from 55.7 in Aug & the 4th straight increase for the index (a reading above 50 indicates growth).  Manufacturers added jobs last month at the fastest pace in more than a year.  A measure of output rose in Sep & new orders grew at a healthy pace, though slower than in Aug.  Demand for motor vehicles & housing-related goods is bolstering orders at factories.  A bigger increase in production would come from further improvement in the labor market that propels consumer spending, along with faster growth in overseas markets.

U.S. ISM Manufacturing Index Rose in September

  • FILE - In this Wednesday, Aug. 14, 2013, file photo, a home is for sale in San Diego. Private data provider CoreLogic reports on home prices for August on Tuesday, Oct. 1, 2013. (AP Photo/Gregory Bull, File)
 Photo:   Yahoo

US home prices climbed 12.4% in Aug from a year ago, fueled by more buyers bidding on a limited supply of houses.  Real estate provider CoreLogic says prices also increased 0.9% in Aug from Jul.  But that gain was half the 1.8% increase in Jul from Jun.  The group said higher mortgage rates & the end of the summer buying season likely slowed the gain.  Prices rose in every state compared with the previous year, & in 99 of the 100 largest cities.  Mortgage rates have risen about a full percentage point since May.  There are worries that higher rates could slow home sales.

US home prices rise 12.4 percent from year ago Associated Press

Stocks are cheering the gov shutdown.  Less gov interference is viewed as a plus.  But that is just a knee jerk reaction.  After a few days, the effects of less work being processed will bite more people.  The big winners in the Dow (up more than 1%) are: Merck (MRK), United Healthcare (UNH), General Electric (GE) & Procter & Gamble (PG).  Most gov workers are at their jobs & it is likely that the ones laid off will receive back pay when the new budget is agreed to.

Dow Jones Industrials

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