Tuesday, October 15, 2013

Markets sell off as debt deadline approaches

Dow sank 133 (closing near the lows), decliners over advancers more than 3-1 & NAZ was off 21.  The MLP index dropped 4+ to the 442s & the REIT index was down 1 to 274.  Junk bond funds fell as did Treasuries.  Oil traded lower while gold posted a modest gain.

AMJ (Alerian MLP Index tracking fund)

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Treasury yields:

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U.S. 2-year


U.S. 10-year


CLX13.NYM....Crude Oil Nov 13....101.36 Down ...1.05  (1.0%)

Live 24 hours gold chart [Kitco Inc.]

  • House Speaker John Boehner, R-Ohio, walks away from the microphone during a news conference after a House GOP meeting on Capitol Hill, Tuesday, Oct. 15, 2013, in Washington. House GOP leaders Tuesday floated a plan to fellow Republicans to counter an emerging Senate deal to reopen the government and forestall an economy-rattling default on U.S. obligations. But the plan got mixed reviews from the rank and file, and it was not clear whether it could pass the chamber. (AP Photo/ Evan Vucci)
Photo:   Yahoo

Houe GOP leaders scrambled to forge a plan to counter an emerging bipartisan Senate deal to reopen the gov & forestall a default on US obligations.  But the effort fell into disarray amid grumbling by party conservatives & it was unclear whether GOP leaders could keep it afloat.  Though Reps appeared to back off earlier demands for spending cuts as a condition of raising the gov's borrowing cap, the partisan standoff between Dems & House Reps continued with little certainty over how Congress would bring about the end to the crises.  It was not clear whether the House GOP plan could pass the chamber.  The House measure mirrors in several respects a Senate plan that has generally taken shape.  It would suspend a new tax on medical devices for 2 years & take away the federal gov health care contributions to lawmakers & top administration officials.  It would also fund the gov thru Jan 15 & give Treasury the ability to borrow normally thru Feb 7, provisions embraced by Senate leaders in both parties.  House Speaker John Boehner said he's "trying to find a path forward" but that "there have been no decisions about exactly what we will do."  He said, "There are a lot of opinions about what direction to go."  GOP leaders are massaging the plan in hopes of a vote later today.  Harry Reid blasted the plan as a blatant attack on bipartisanship.  Senate talks appeared on hold as Boehner weighed his next move

House GOP Counter to Senate Debt Plan in Disarray  Associated Press

Directors at the Federal Reserve’s district banks said last month the US economy was expanding at a “moderate” pace, though fiscal “uncertainties” & higher interest rates remained risks to the outlook.  “Directors viewed recent readings on manufacturing activity & the housing & auto sectors as generally positive,” according to minutes.  “Directors continued to see downside risks to the outlook stemming from ongoing domestic fiscal constraints and uncertainties, recent increases in long-term interest rates, and geopolitical concerns.”  A separate set of minutes, from the FOMC’s Sep 17-18 monetary policy meeting, was released last week.  The Board of Governors made no change to the discount rate, which has been at 0.75% since Feb 2010.  Directors at the Philadelphia, Dallas & Kansas City district banks requested a quarter percentage-point increase in the rate to 1%, as they had in previous meetings.  The Minneapolis FED directors, who had previously supported leaving the rate unchanged, requested the rate be lowered to 0.5%.  The other 8 reserve banks voted to keep the rate unchanged.  “Those directors favoring a reduction in the primary credit rate believed that a looser setting would help to foster the Committee’s macroeconomic objectives of maximum employment and price stability,” according to the records, which pertained to the last 3 meetings.

Fed Regional Directors Saw ‘Moderate’ Growth Amid Fiscal Risks

  • FILE - This Monday, July 15, 2013 file photo shows Johnson & Johnson baby products for sale at a pharmacy in Miami. Johnson & Johnson is expected to report quarterly earnings on Tuesday, Oct. 15, 2013. (AP Photo/Lynne Sladky, File)
Photo:   Yahoo

A big jump in prescription drug sales & continued recovery of Johnson & Johnson's beleaguered consumer health business in Q3 helped the health care company overcome a new problem: slumping sales of its medical devices.  That was mainly due to pricing pressure in the US that forced JNJ to cut prices for devices including diabetes testing products & spine & hip replacement parts, & trouble integrating part of orthopedic products maker Synthes, bought last year for $20B.  EPS was $1.04 which compares with $1.05 a year earlier.  Excluding charges, EPS was $1.36, 4¢ more than expected.  Revenue rose 3% to $17.58B.  Analysts expected $17.43B.  "We are still seeing (health care) utilization rates that are essentially flat year over year," CFO Dominic Caruso said.  That's been a problem throughout the lengthy global economic slowdown, as consumers delay elective surgical procedures & "trade down" to store brands rather than the pricier Band-Aids & nonprescription medicines.  Those nonprescription drugs, responsible for most of the roughly 4 dozen product recalls over the past 4 years, saw sales jump 18% in the US & 6.4% worldwide as more products were returned to stores.  Pain relievers such as Tylenol & Motrin, among the products recalled for reasons including wrong active ingredient levels & contamination with metal & plastic particles, fueled that growth.  The decline in device sales enabled the prescription drug business to regain its position as the top revenue generator. The stock gained 13¢.

Johnson & Johnson (JNJ)

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Traders are starting to bail out of stocks.  There is a sense of gloom that dysfunctional DC will not be able to meet the deadline for raising the debt ceiling.  Of course, nobody knows & deadline DC has a habit of settling things about an hour or 2 after a midnight deadline.  Is this a sloppy way of handling enormous financial problems?  Of course it is.  But the markets have been grading easy for a few years & will probably greet any last deal with enthusiasm.  We are still in Oct, which is remembered as the month with some of the ugliest days in stock market history.

Dow Jones Industrials

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