Friday, November 1, 2013

Mixed markets on indecisive economic news

Dow jumped 69 (closing near the highs), but decliners ahead of advancers 3-2 & NAZ was up 2.  The MLP index was up pocket change in the 455s & the REIT index was fractionally higher in the 279s.  Junk bond funds were mixed while Treasuries pulled back.  Oil continued weak, taking it below 95, & gold also lost ground.

AMJ (Alerian MLP Index tracking fund)

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Treasury yields:

U.S. 3-month


U.S. 2-year


U.S. 10-year


CLZ13.NYM....Crude Oil Dec 13....95.04 Down ...1.34  (1.4%)

Live 24 hours gold chart [Kitco Inc.]

Federal Reserve Building

Photo:   Bloomberg

The Federal Reserve (FED) will examine how the biggest banks might react to a jump in long-term interest rates & another housing crash as it released the next round of stress-test scenarios designed to monitor the ability of the US financial system to withstand economic shocks.  The central bank in 2 adverse scenarios will measure the impact from rising prices in some US property markets & tightening spreads on high-yield, high-risk loans & bonds, according to a release by the FED.  It is using the tests, based on hypothetical adverse conditions instead of forecasts, to encourage the 30 biggest banks to build capital cushions against economic turmoil.  The FED said 12 additional banks will be subject to the capital review.  The 18 bank holding companies tested previously have increased their aggregate tier 1 common capital to $836B in Q2 from $392B in Q1-2009.  The tier 1 common ratio, which compares capital to risk-weighted assets, has more than doubled to a weighted average of 11.1% from 5.3%.  After the test, 10 of the 19 largest banks were required to raise $75B in total equity capital.  Since then the tests have evolved into an exercise in forward-looking capital planning.

Fed to Test Banks Against Interest Rate Rise, Housing Collapse

South Korea Manufacturing

Photo:  Bloomberg

Manufacturing strengthened from China to South Korea last month in a sign that growth risks are abating in Asia & expansion may pick up in Q4.  China’s official manufacturing Purchasing Managers' Index rose more than estimated to an 18-month high & a measure from HSBC Holdings Plc & Markit Economics topped projections.  HSBC’s reading for South Korea was above the expansion-contraction dividing line of 50 for the first time since May & Taiwan's PMI rose to 53 from 52.  Australian & UK indices also showed growth.  Asian economies are benefiting from a demand pickup aided by the FED's extension of monetary stimulus even as global risks remain from budgetary wrangling in DC.  A sustained recovery in China may give the gov more room to implement reforms the World Bank has said are critical for the nation to become a high-income nation.  China’s official PMI was at 51.4, the National Bureau of Statistics & China Federation of Logistics & Purchasing said.  That compares with 51.1 in Sep & the 51.2 estimate.  The gauge from HSBC & Markit rose to 50.9 from 50.2, matching a preliminary reading & exceeding the 50.7 estimate.

Manufacturing Strengthens From China to South Korea

Obamacare Documents Show 248 Enrollments in First 2 Days

Photo:   Bloomberg

The Obamacare health-insurance exchanges enrolled 248 people in their first 2 days, as website outages & software errors hindered sign-ups, according to documents obtained by a congressional oversight committee.  Notes from 3 meetings at an Obama administration “war room,” obtained by Rep Representative Darrell Issa, show just 6 people had enrolled on Oct 1, the first day of the website’s operation.  The summary of an Oct 2 meeting stated that “direct enrollment is still not working” & about 40K applicants were idling in a virtual “waiting room.”  The documents were circulated by the Reps who are seizing on the botched rollout.  About 7M, mostly those who are currently uninsured, are supposed to gain medical coverage in 2014 thru exchanges created under Obamacare, the Congressional Budget Office estimates.  “We have always anticipated that the pace of enrollment will increase throughout the enrollment period,” Joanne Peters, a spokeswoman for the Dept of Health & Human Services, said.  The notes circulated by Issa don’t reflect “official enrollment statistics.”  As of Oct 25, Peters said, 700K had submitted applications for insurance under the law.  About half of those were through the federal online marketplace serving 36 states.  The remaining 14 states built their own exchanges.  Can you say, "Uh-oh?"

Obamacare Saw Just 248 Insurance Enrollments in Two Days, Documents Show

Stocks extended their winning ways.  Dow managed a gain of 40 this week & is up an amazing 2½K this year (one of its best years  in history).  It remains within spitting distance of the record set this week.  But supporting economic news has been anemic to say the least.  Obamacare looks to be a major headache & problem for the economic recovery.  People who can't log on to the website & many others who are worried about what the future holds for them regarding health insurance may pull in their spending.   With the holiday season approaching, the outlook for retail sales is not promising.

Dow Jones Industrials

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