Tuesday, December 10, 2013

Mixed markets waiting for budget deal in DC

Dow lost 52, decliners over advancers 3-2 & NAZ was off 8.  The MLP index lost 1+ to the 441s (continuing sideways trading since late Mar) & the REIT index inched up a fraction to 268 (47 below the yearly high).  Junk bond funds continued mixed & Treasuries finally found a few buyers.  Oil was strong & gold had a good pop to the upside.

AMJ (Alerian MLP Index tracking fund)

stock chart

Treasury yields:

U.S. 3-month


U.S. 2-year


U.S. 10-year


Live 24 hours gold chart [Kitco Inc.]

A bipartisan budget deal could be reached later today as the politicos wrap up work on a few remaining items, negotiator Senator Patty Murray said.  “The final issues will be resolved,” Dem Murray said, followed by, “I’ll talk to you all later today.”  The emerging agreement is already being criticized by Reps who don’t trust proposals for future savings & from Dems who say it will punish federal workers.  Rep Representative Paul Ryan & Murray, lead negotiators on the budget panel, working against a self-imposed Dec 13 deadline.  House Speaker John Boehner has said the lack of an agreement won’t alter his plan to adjourn this week for a holiday break.  Amid skepticism, Murray & Ryan are pushing ahead & the outlines of their accord could be presented to party caucuses this week.  To increase chances any accord would pass a divided Congress, Ryan & Murray have set aside the most contentious budget options, which also would yield the greatest savings: higher taxes for corps that Reps oppose & cuts in entitlement programs such as Medicare that Dems have vowed to block.  The pair aims to save $65B, a sliver of the $1-$4T budget agreement Congress & the president have tried to reach since 2010.  Without an agreement this week, Congress may stall action on spending legislation until closer to Jan 15, when the gov faces running out of funds.  A spending deal wouldn’t slow the growth of the national debt or alter tax breaks Dems targeted for elimination.  The accord also wouldn’t fully replace the automatic cuts, a goal when the panel began its work.

Bipartisan Budget Accord Seen by Murray Amid Lawmaker Ire

Sales will be stronger for US manufacturers in 2014 after revenue this year fell short of projections, according to a survey by the Institute for Supply Management.  Purchasing managers at manufacturers estimate a 4.4% increase in sales in 2014 after revenue rose 3.4% this year.  The group’s forecast in Apr showed purchasing managers projected a 4.8% advance in revenue for 2013.  “Manufacturing purchasing and supply executives expect to see continued growth in 2014,” Bradley Holcomb, chairman of the group’s factory committee, said.  “They are optimistic about their overall business prospects for the first half of 2014, and are even more optimistic about the second half.”  For non-manufacturing industries, revenue climbed 4% this year, stronger than the 3.5% projection in Apr.  Service industries forecast a 3.6% gain in sales next year.  Manufacturers also saw greater promise for adding staff, predicting a 2.4% increase by the end of 2014, while service providers projected employment will climb 2.1%.  Service companies are more optimistic about 2014.  56% of those surveyed have a “better outlook” on 2014, up from the 47% at the same time last year.   For manufacturers, 44% see better business conditions next year, up from 42% for 2013.

Manufacturers in U.S. ‘Optimistic’ About Growth in 2014

OPEC reduced crude production in Nov to the lowest level in more than 2 years as output dropped below the organization’s 30M barrel-a-day ceiling for a 3rd month, pumping 29.63M barrels compared with 29.83M in Oct.  That’s the lowest since May 2011.  The group decided to maintain its output limit of 30M at a meeting last week because members were “all satisfied,” Ali al-Naimi, Saudi Arabia's oil minister said.  “In taking this decision, member countries reconfirmed their readiness to promptly respond to unforeseen developments that could have an adverse impact on an orderly and balanced oil market,” OPEC said.  It's been predict that some members, notably Saudi Arabia, will probably need to reduce output in 2014 to prevent a global glut.  The US is producing the most oil in a quarter-century, while Iraq, Libya & Iran have said they plan to increase exports in the next several months.  Today’s report was published before Libya said that 3 oil ports in eastern Libya will reopen on Dec 15.  The ports, including Es Sider, the largest, had been closed since late Jul.  Output from Saudi Arabia, OPEC’s biggest producer, fell to a 5 month low of 9.63M barrels a day last month from 9.71M in Oct.  Production also dropped in Libya, Nigeria, the UAE, Algeria & Kuwait, while supplies climbed in Iraq, Iran & Angola.

OPEC Pumps Least Crude in More Than Two Years as Saudi Arabia Cuts Output

As predicted, nothing special is going on in the markets.  While the budget battle is getting immediate attention, the FOMC meeting next week is of greater interest.  The bulls want QE3 to last forever, despite what they may say.  Any slight pullback on the bond buying program will be felt in the stock market.  Of course, raising the debt ceiling next month could bring on another rough fight.

Dow Jones Industrials

stock chart

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