Tuesday, October 15, 2013

Markets drift lower while lawmakers negotiate

Dow fell 61, decliners over advancers 2-1 & NAZ was off 5.  The MLP index fell 1+ to 446 & the REIT index was down fratcionally in the 274s.  Junk bond funds & Treasuries slid lower.  Oil dropped as world powers held talks with Iran on its nuclear program & the dollar strengthened against the € amid optimism that Senate leaders will reach an agreement to raise the US debt limit.  Gold hardly budged.

AMJ (Alerian MLP Index tracking fund)

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CLX13.NYM...Crude Oil Nov 13...101.49 Down ...0.92  

GCV13.CMX...Gold Oct 13........1,273.40 Down ...3.00  (0.2%)

Reid, McConnell Provide Update on Debt-Limit Talks

Photo:  Bloomberg

“We’ve made tremendous progress,” Harry Reid said yesterday on the Senate floor with his Rep counterpart, Mitch McConnell.  “We are not there yet.”  Senate leaders are poised to reach an agreement as early as today to bring a halt to the fiscal standoff, & now must race the clock to sell the plan to lawmakers before US borrowing authority runs out on Fri.  The emerging deal would stave off a potential default, end the 15-day-old gov shutdown & change the immediate deadlines in favor of 3 new ones over the next 4 months.  It’s far from complete as the Senate may delay passing the plan & House Reps may seek to block or change it.  Lawmakers would be required to hold budget talks by Dec 13, fund the gov thru Jan 15, 2014, & extend the nation’s borrowing authority until Feb 7, 2014.  An agreement would forestall the immediate crisis, end the shutdown that has closed many federal services & prevent a possible default that the Treasury said may be catastrophic.  Lawmakers, who have governed from fiscal crisis to fiscal crisis for more than 2 years, may be setting up more crises in the near future.  The agreement would delay the next major deadline, the Jan 15 lapse in gov funding, until after the holiday shopping season.  There are 2 potential obstacles.  First, a single senator would be able to use procedural tactics to push a final vote past the Oct. 17 lapse in borrowing authority.  Also, House Reps, who have demanded major changes to Obamacare, may resist any proposal that contains few of their priorities.  This is DC where nobody knows what's going on!

Senate Debt-Limit Deal Emerging With Time Running Short

  • The Citibank logo is seen at branch in Washington in this April 18, 2011 file photo. REUTERS/Larry Downing
Photo:   Yahoo

Citigroup posted weaker-than-expected Q3 earnings, hit by a drop in bond trading revenue after the Federal Reserve (FED) refrained from changing its bond buying program & customer activity fell.  The FED's decision took investors by surprise & led many to take a wait-and-see attitude until there is a clearer time frame for the end of the economic stimulus program.  In last year's Q3 Citi took a pretax charge of $4.7B related to selling its Smith Barney brokerage business.  Citi has struggled to improve the fortunes of the 3rd-largest US bank in an environment where client business is tepid & new regulations are raising expenses.  Meanwhile Citi has winnowed down the assets it is looking to shed, known as Citi Holdings, to $122B, down 29% from a year earlier & down 7% from Q2.  Citi Holdings now accounts for a little more than 6% of the bank's overall assets, compared with about 9% in last year's Q3.  But results were weak at many businesses.  Revenue for its retail banking business fell 7% to $9.24B, & revenue for its securities & banking business fell 2% to $4.75B.  GAAP EPS rose to $1.00 from 15¢ a ago.  Excluding the Smith Barney charge, as well as the impact of tax benefits & changes in the value of Citi debts, EPS slipped to $1.02 from $1.06 last year.  On that basis, revenue fell 5% to $18.2B.  Analysts expected earnings of $1.04.  The stock lost a dime.

Citi Adjusted Profit Hit by Bond Trading Slowdown

Citigroup (C)

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Bottles of Coca-Cola Co. Soda

Photo:   Bloomberg

Coca-Cola, a Dow stock & Dividend Aristocrat, Q3 profit rose as sales volumes advanced in North America & the European business began to rebound.  EPS rose to 54¢ from 50¢ a year earlier.  Excluding some items, EPS was 53¢, in line with the estimate.  CEO Muhtar Kent fought back against persistent consumer uncertainty in developed nations & what he called “increasing volatility across emerging markets” by strategically raising prices & getting more consumers to grab a drink on the go.  Kent said he still expects the company & its bottlers to reach $200B in global revenue by 2020, double that generated in 2010.  Beverage sales declines in Europe improved, sliding 1% compared with a 4% fall in Q2.  In North America, sales rose 2% after slipping 1% in Q2.  But revenue declined 2.5% to $12.03B, slightly under the $12.05 estimate.  The company also said fluctuating currency will decrease comparable operating income in Q4 by as much as 6%.  Global sales volume grew 2%, less than the 2.9% estimate.  The stock went up 16¢.

Coca-Cola Quarterly Net Climbs as North America Sales Rise

Coca-Cola (KO)

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Traders have their eyes on DC & little is happening other than posturing.  Q3 earnings are starting to come out & early signals are they will not be anything special.  Just more of the same.  But dysfunctional DC is making it hard on all execs as they plan for the new year.  In addition, dysfunctional DC may make for a disappointing holiday shopping season.  Markets continue to take uncertainty very well.  Not sure how long patience will last given all the chaos going on.

Dow Jones Industrials

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