Monday, November 25, 2013

Markets waffle while assessing the Iran deal

Dow inched up 7 to another record high, decliners over advancers almost 3-2 & NAZ added 2 after going over 4K (a 13 year high) in AM trading.  The MLP index was up 1+ to the 456s while the REIT index slipped 1+ to the 265s.  Junk bond funds were weak & Treasuries did little.  In the PM, oil fell after Iran & world powers reached an interim accord on its nuclear program.  Gold rallied in the PM on the uncertainties over the deal with Iran.

AMJ (Alerian MLP Index tracking fund)

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CLF14.NYM....Crude Oil Jan 14....94.18 Down ...0.66  (0.7%)

Live 24 hours gold chart [Kitco Inc.]

U.S. Capitol Building

Photo:    Bloomberg

With less than 3 weeks until their deadline, US budget negotiators have yet to break an impasse over revenue, prompting lawmakers to draft plans to blunt $19B in defense cuts set to start in Jan.  One idea, known as “smoothing,” would redistribute the 2014 reductions across the 10-year timeframe of the automatic Pentagon cuts (sequestration).  Instead of the cuts hitting in Jan, defense spending next year would remain at or higher than the current $518B level, with greater reductions coming in future years.  Budget analysts call the smoothing approach a gimmick, & Tea Party-aligned lawmakers probably will oppose it.  But, if Dems & Reps on the 29-member budget panel can’t bridge the revenue divide, smoothing may serve as an alternative for both parties that want to stop cuts the Pentagon says will devastate important military functions.  Aides say they are inching closer to a tentative deal.  They’re identifying savings outside major entitlement programs to replace a small portion of the $1.2T in automatic spending cuts over a decade, with a Dec 13 deadline for an agreement.  Paul Ryan, a Rep, has drawn up options both chambers have included in their respective budget resolutions.  Political pressure is mounting for some deal.  They remain split over whether additional revenue by ending some tax breaks should be a part of an accord.  House Speaker John Boehner has repeatedly ruled out any tax increases while Senator Murray says revenue must be included.  Senate Dems last week ended filibusters for most executive nominations, leading to an escalation in partisan battling.  Reps warned the vote will create an environment that could undermine the work of the budget panel & efforts to reach fiscal deals.  Boehner said he is making contingency plans in case the budget talks fail, saying the House will vote on a temporary spending bill keeping the gov open & the spending caps in place.  DC chaos drags on.

Lawmakers Ready Budget Fallback Options Amid Tax Impasse

The Treasury’s sale of $32B of 2-year notes drew above-average demand on speculation that the Federal Reserve's efforts to hold down short-term yields will support the debt.  US debt was little changed after the auction’s bid-to-cover ratio, which gauges demand by comparing total bids with the securities offered, was 3.54X, the most since Apr & above the average of 3.28X for the past 10 sales.  The notes were sold at yield of 0.3%, compared with a forecast of 0.299%.  But the Treasury 10-year notes are headed for their worst month since Jun.

Treasury $32 Billion 2-Year Note Sales Draws Above-Average Bids

TV Host Katie Couric

Photo:   Bloomberg

Katie Couric is near an agreement with Yahoo to create news programming for the Web portal & a deal will probably be announced early next week.  Couric would give YHOO another recognizable name to draw viewers & advertisers.  Marissa Mayer, who joined YHOO as CEO last year, has added also gadget reviewer David Pogue & editor Megan Liberman from the New York Times.  YHOO has been leaked that ABC let Couric out of an agreement to produce segments exclusively for its network news division.  Couric will continue to work closely with ABC, which already provides news reports to Yahoo.  Mayer has stepped up efforts to produce professional news content.  The company hired Pogue last month to lead an expansion of technology coverage on the largest US Web portal.  Earlier this year, the company brought on Liberman as editor-in-chief for Yahoo News.  The company also has partnerships to use programming from ABC News & NBC Sports.  YHOO stock has been strong in the last year, but lost 20¢ today.

Katie Couric Said Near Deal to Create Yahoo News Reports

Yahoo! (YHOO)

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There was no conviction in today's trading.  Volume was not exceptional as some traders are taking a long holiday this week.  The Iran deal is fuzzy & the pres has to explain it to skeptical allies.  The market's gut reaction (out of the gate at the opening) was favorable.  Upon reflection, nobody is clear what it will bring.  There is a committee in DC working on the budget mess, but it looks to be far from a compromise.  Nothing has changed.  Dems want more taxes & Reps want budget cuts (which means some people won't get money from the federal gov).  With a holiday spirit this week, nothing will get done & then there's less than 2 weeks to fund the gov.  This will result in another last minute deal that solves nothing, only postpones the budget mess for another couple of months

Dow Jones Industrials

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