Tuesday, December 17, 2013

Markets waffle while looking for direction

Dow slid 9, decliners barely ahead of advancers & NAZ lost 5.  The MLP index dropped 1+ to the 437s but the REIT index moved up 1+ to the 262s.  Junk bond funds were mixed to higher & Treasuries rose on hopes the Federal Reserve (FED) will repeat an outlook for low rates.  Oil slipped back & gold fell for the first time in 3 sessions after a report showed no change in the US cost of living in Nov, reducing demand for the metal as a hedge against inflation.

Dow Jones Industrials

stock chart

Treasury yields:

U.S. 3-month


U.S. 2-year


U.S. 10-year


CLF14.NYM....Crude Oil Jan 14....97.20 Down ...0.28  (0.3%)

Live 24 hours gold chart [Kitco Inc.]

The FED's balance sheet will exceed $4T, prompting warnings its record easing is inflating  asset-price bubbles & drawing renewed scrutiny just as Janet Yellen prepares to take charge.  The assets rose to a record $3.99T on Dec 11, up from $2.82T in Sep 2012, when it embarked on Q3.  Policy makers meet today & tomorrow to decide whether to start curtailing the $85B monthly pace of purchases.  Big Ben, whose 2nd 4-year term ends next month, has quadrupled the assets since 2008 with bond purchases intended to lower long-term borrowing costs & reduce unemployment.  Vice Chairman Yellen, who should win confirmation this week to replace Bernanke, has been a supporter of the policy.  The FED has said it will keep buying bonds until the outlook for the labor market has “improved substantially.”  The FED’s balance sheet exceeds the GDP of Germany, the world’s 4th-largest economy & is enough to cover all US gov spending for more than a year.  It could pay off all student & auto loans in the country with $2T to spare.  Q3 will probably total $1.54T before it ends, bringing the balance sheet to $4.36T, according to recent estimates.

Fed’s $4 Trillion in Assets Draw Lawmakers’ Scrutiny

German Chancellor Angela Merkel said she wants to keep negotiations on Europe's “very complicated” bank-failure system out of the summit of European leaders starting in 2 days.  Merkel’s comments came hours after she was sworn in for a 3rd term, echoed ECB President Mario Draghi's criticism yesterday that proposals by euro-area govs on how to deal with failing banks may be too cumbersome to work.  Finance ministers resume talks on the banking union tomorrow “and I hope that we as heads of state and government won’t have to deal with it” at the Dec19-20 summit in Brussels, Merkel said.  “We’ve been talking about banking union for months.”  “We Germans have laid down very clear conditions, but I do see a chance that we can make it,” she added.  “I just don’t know for sure yet.”  Banking union is “a very complicated topic” that’s “very important for the acceptance of the euro on the financial markets.”

Merkel Says EU Leaders Aim to Avoid Banking-Union Summit Tussle

Boeing, a Dow stock, has been cruising higher this year  Last month orders for its next-generation 777X aircraft totaled nearly $100B during the Dubai Airshow, bringing its total backlog of orders to more than $500B.  This provides investors a stable revenue stream in case the company or the economy hit a speed bump, or if the defense segment declines amid gov budget cuts.  In addition, BA just announced more plans to return value to shareholders.  This week management announced a 50% quarterly div increase to 73¢.  Management also announced an additional $10B for the company's share repurchase program.  That authorization will add to the approximately $800M remaining from its 2007 stock repurchase authorization.  BA has a great track record with div increases, & this hike will only move its yield from 1.4% to 2.1%.  The stock jumped 1.16, pretty much matching its record high reached last month.

Boeing's Dividend Soars 50% as the Company Flies Higher

Boeing (BA)

 stock chart

The bulls are biting their nails, praying the FED will extend its QE3 bond buying program.  At the same time, yield securities are having a tough time finding friends.  Soon the announcement by the FED will be released & the markets will react.

Dow Jones Industrials

stock chart

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