Wednesday, October 2, 2013

Lower nervous markets as the shutdown continues

Dow was off 58, decliners over advancers 3-2 & NAZ slipped 2.  PM buying trimmed losses for the yield sectors.  The MLP index lost a fraction at just over 450 & the REIT index was up pennies at 272.  Junk bond funds were mixed & Treasuries gave up some of the AM gains.  Oil rose for the first time in 4 days after TransCanada said it expects to complete work on the southern portion of its Keystone pipeline expansion by the end of Oct.  Gold had the biggest gain in almost 2 weeks on speculation that the Federal Reserve will delay reducing fiscal stimulus amid the first gov shutdown in 17 years, stoking demand for the metal as a store of value.

AMJ (Alerian MLP Index tracking fund)

stock chart

Treasury yields:

U.S. 3-month


U.S. 2-year


U.S. 10-year


CLX13.NYM...Crude Oil Nov 13....104.04 Up ...2.00  (2.0%)

Live 24 hours gold chart [Kitco Inc.]

President Barack Obama

Photo:   Bloomberg

Partisan battles over the gov shutdown & a potential debt default are beginning to merge into a single fiscal fight, raising the stakes for Reps & Dems to end the impasse.  Lawmakers are linking the 2 issues more closely, a connection the administration is reinforcing.  The pres met today with financial industry execs to focus attention on the risk of a default.  With no immediate progress on resolving the federal closure, the standoff over funding the gov is increasingly likely to continue as a deadline closes in to raise the debt limit.  Treasury Secretary Lew yesterday repeated the warning that the Treasury will exhaust its borrowing authority on Oct 17.  Recognition of the strengthening linkage rippled thru financial markets this AM, as stocks slid around the world & gold rallied.  Each side has reason to believe the approach of the debt limit provides more leverage.  Reps can argue that Obama fears a default more than a shutdown, & the administration can use the prospect of a default to portray Reps as irresponsible & bring pressure on them thru party allies in the business world.  Yesterday, in a meeting for congressional leaders, Obama said “My basic message to Congress is this.”  “Pass a budget; end the government shutdown; pay your bills; prevent an economic shutdown; don’t wait; don’t delay; don’t put our economy or our people through this any longer.”

Shutdown Seen Merging With Debt-Limit Fight Amid Impasse

  • President of the European Central Bank (ECB) Mario Draghi attends a news conference of the European Central Bank at the French National Bank in Paris, Wednesday, Oct. 2, 2013. The governing council of the European Central Bank met in Paris to set the benchmark interest rate for the eurozone; economists and investors look to the meeting to see where the bank thinks the European economy is headed. (AP Photo/Michel Spingler)
Photo:   Yahoo

Top European officials are keeping a worried eye on the US gov shutdown, saying it could pose a risk for the continent's fledgling recovery.  The US has the world's largest economy & close business ties with Europe.  So the shutdown, which has seen 800K federal employees put on furlough, could hurt growth in the region if Congress does not agree on a new budget deal within days.  Mario Draghi, said that the shutdown "is a risk if protracted," though he added that the "the impression is that it won't be."  Top officials in France, the 2nd-largest economy in the 17-member eurozone, expressed similar concerns.  France is just emerging from a double-dip recession.  Like much of the region, its economy remains fragile.  Companies are still wary of investing, hiring & could become even more so if they fear business in the US could be hurt by the shutdown.  "If this situation lasts, it could slow down the ongoing economic recovery," Pierre Moscovici, the finance minister, said at the gov weekly Cabinet meeting. 

Outside US, ripple effects of budget battle feared Associated Press

Car Dealership

Photo:   Bloomberg

Japan's Big 3 carmakers (Toyota, Honda & Nissan) reported US sales declines in Sep with tight supplies of some models after a surge in Aug & fewer weekend selling days.  TM, the world’s largest automaker, posted a 4.3% decrease last month, & Nissan sales fell 5.5%, bigger declines than expected.  Honda, most reliant, had a 9.9% sales drop that topped estimates.  Only Fuji Heavy Industries's Subaru among Asian auto brands expanded sales, reporting a 15% increase for Sep.  Sep looks like a lull for auto sales that remain on pace for the best volume since 2007.  Deliveries for the first 2 days of Sep, including the Labor Day holiday, didn’t contribute to automakers’ tallies as they were counted in Aug figures.  Industrywide sales slipped 4.2% in Sep, the first decline in 27 months, according to Autodata.  Deliveries of new cars and light trucks slid to 1.14M, in line with the average estimate.  The annualized industry sales rate, adjusted for seasonal trends, climbed to 15.3M, missing the 15.4M estimate.  TM stock rose 34¢.

Toyota to Honda U.S. Deliveries Decline on Amid Short Month

Toyota (TM)

stock chart

There was a modest rebound for stocks in the PM.  The pres met with business leaders so he could hear how destructive the shutdown is.  This evening he will talk to leaders from Congress who will give the same message.  They should stop name calling which suggests there is no hope for an end to the shutdown.  Combining the budget mess with raising the debt ceiling makes sense, but that alone produces nothing.  People on both sides will have to give up some pride if there is a compromise & that looks to be a long way off.  Meanwhile the stock market is taking this upsetting news well.  That may not last when earnings start coming next week.  By the way, it's unclear whether the monthly jobs report will be reported on Fri (because of the gov shutdown).

Dow Jones Industrials

stock chart

I just got word from one of my friends at MarketClub, that for a very limited time, they’re opening up their premium service for a no-cost, 2 week trial!  Like many of you, I’m a huge fan of INO, and from what I have seen so far, their service Marketclub!  This isn’t a stripped down version, everything in MarketClub is available to you. I don’t want to give everything away, but you’ll have unlimited access to my favorite three tools: Trade Triangles, Smart Scan, and Alerts!  The best part is that the MarketClub customer support team will be providing UNLIMITED support!  You can call or email for an instant response to any question, comment or concern.

Here’s that link:
I’d recommend you jump on this now.

No comments: