Friday, October 11, 2013

Markets vacillate while lawmakers talk

Dow slipped pocket change, advancers ahead of decliners 5-4 & NAZ was essentially even.  The MLP index was up a fraction to 441 & the REIT index added pennies in the 272s.   Junk bond funds rose & Treasuries did little.  Oil fell as the International Energy Agency forecast that rising production in North America will boost non-OPEC output by the most since the 1970s.  Gold fell below $1300 as lawmakers try to reach agreement to avert a default.

AMJ (Alerian MLP Index tracking)

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CLX13.NYM....Crude Oil Nov 13...101.07 Down .....1.94  (1.9%)

GCV13.CMX...Gold Oct 13.........1,268.60 Down ...28.00  (2.2%)

The pres & House Rep leaders were moving toward an agreement to extend the nation's borrowing authority even as they remained at odds over terms for ending the partial gov shutdown.  They met for 90 minutes at the White House yesterday after John Boehner said he would offer a measure to postpone a potential US default to Nov 22 from Oct 17, a step back from the brink that was enough to trigger the biggest rise in US stocks in 9 months.  The developments were the first sign that the pres & Reps could resolve the fiscal impasse without negative economic consequences from a default as the halt in gov operations moved into its 11th day.  Any prospective deal faces many questions, including whether Boehner can reach an agreement without losing the support of his members.  Obama didn't accept or reject the Rep plan for a short-term increase in the debt limit, & the 2 sides planned further talks among their staff members last night to address Obama's insistence that Reps agree to fund the gov before starting broader fiscal talks.  "No specific determination was made," the White House said in a statement.  The 2 sides talked about "potential paths forward."  Rep Eric Cantor called the meeting "constructive" & that with talks continuing overnight "hopefully we will have a clearer way, path forward."  Uh Huhh!

Republicans Enter Debt Limit Talks With Obama Bloomberg

In Oct consumer sentiment in the US fell to a 9 month low as the gov partial shutdown & the debt-ceiling debate caused outlooks to sour.  The Thomson Reuters/University of Michigan preliminary consumer sentiment index decreased to 75.2 this month from 77.5 in Sep.  The forecast was for a drop to 75.3.  Households are becoming pessimistic about the economy as the shutdown heads into a 3rd week & the deadline looms for raising the debt limit & avoiding a default.  Nonetheless, improved stock values & home prices have lent support to balance sheets, especially for wealthier Americans.  The index averaged 89 in the 5 years leading up to the economic slump that began in Dec 2007, & 64.2 during the 18-month recession that ensued.  Some of the increase resulted from the gov partial closure, which initially placed about 800K civilian employees on furlough.  The Michigan sentiment survey’s current conditions gauge, which measures Americans’ view of their personal finances, rose to 92.8 in Oct from 92.6 & the index of expectations 6 months from now dropped to 63.9, the weakest this year, from 67.8 last month.

Consumer Sentiment in U.S. Fell in October to Nine-Month Low

  • FILE- In this Tuesday, July 16, 2013, file photo, an ATM is displayed at a Wells Fargo bank, in Atlanta. Third-quarter profit for Wells Fargo & Co., the biggest U.S. mortgage lender, jumped 13 percent as a decline in revenue from mortgage lending was offset by reduced expenses and fewer soured loans, the company reported Friday, Oct. 11, 2013. (AP Photo/David Goldman, File)
Photo:   Yahoo

Q3 profit for Wells Fargo, the biggest US mortgage lender, jumped 13% as a decline in revenue from mortgage lending was offset by reduced expenses & fewer soured loans.  EPS was 99¢, beating the 97¢ forecast.  But Q3 revenue dipped to $20.5B from $21.2B, coming in below the forecast of $21.1B.  Interest rates on mortgages rose sharply in the spring & summer which had a negative impact on the mortgage business.  The bank controls nearly a 1/3 of the mortgage market.  Much of its lending business has been coming from mortgage refinancing, which was reduced by the spike in interest rates.  WFC funded $80B worth of mortgages in Q3, down from $139B a year earlier.  Fewer bad loans in an improving housing market cut lending losses to $975M from $2.4B last year.  The bank reduced expenses to $12.1B, down $153M from Q2, due mainly to reduced employee bonuses & legal costs.  The bank had said back in Jul that higher interest rates would negatively impact its mortgage business.  Now, it says it will be in a strong position with its variety of businesses to weather the economy's move to higher interest rates.  Strong revenue growth is coming from credit cards, personal credit management & retirement services.  The stock sank 1.03.

Wells Fargo Posts Record Net Income as Stumpf Curbs Expenses

Wells Fargo (WFC)

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Stocks are back to meandering while the politicos try to figure what their next step is.  More attention is being paid to the approaching holiday retail season.  Retailers are nervous while politicos fiddle.  Even if this latest extension is approved, it will only mean that negotiations will have to begin immediately to prevent a debt default around Black Fri.  Meanwhile about 1M paychecks are not going to households.  Any last minute "agreement" should not be greeted with enthusiasm.  It's just postponing misery which is becoming a significant drag on a weak recovery.

Dow Jones Industrials

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