Wednesday, June 10, 2015

Markets zoom on hopes for another Greek bailout

Dow soared 236 to exactly 18K (but off the highs), advancers over decliners 5-2 & NAZ climbed 62.  The MLP index was down 1 to the 417s & the REIT index rose 2+ to go over 310.  Junk bond funds saw selling & Treasuries lost more ground taking yields to their highest since early Oct.  Oil rallied for a 2nd day as US gov data confirmed a big weekly drawdown in domestic crude stockpiles & gold had a modest gain.

AMJ (Alerian MLP Index tracking fund)

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CLN15.NYM....Crude Oil Jul 15....61.22 Up ...1.08 (1.8%)

Live 24 hours gold chart [Kitco Inc.]

House Rep leaders set a showdown vote for Fri on legislation that would give fast-track trade promotion authority to pres Obama.  “The vote is Friday,” said rep Tim Walberg, Michigan Rep, as he left a closed-door meeting among Reps.  He said Speaker John Boehner & other House leaders told rank-&-file Reps.  “Trade votes are never an easy lift around here, but Republicans are continuing to work and we’re seeing some positive momentum,” Boehner said.  The fast-track measure, passed May 23 by the Senate, would let Obama submit trade agreements to Congress for an expedited, up-or-down vote without amendments.  The pres has said he wants to complete a 12-nation Trans-Pacific Partnership & send it for approval under that procedure.  Whether there is enough support to pass the bill is uncertain & the vote is expected to be tight.  Reps control the House, 246-188, meaning that if all members vote, support from 218 lawmakers is needed to pass a bill.  House Appropriations Chairman Hal Rogers of Kentucky said leaders are still short of the votes needed for passage & will try “to make it work.”  While the plan would meet Dem demands to fund aid to displaced workers without making $700M in Medicare cuts, the procedure proposed by Reps would still demand that they vote for the Medicare cuts in one bill before reversing them in another.  That separate measure would have to go to the Senate for another vote.  Dems want a guarantee that the provision dropping the Medicare cuts will be enacted.  Banks also scored a victory in that part of the trade package.  The House is removing language that would have required them to report to the IRS annually on non-interest-bearing accounts & accounts that earned less than $10 in interest.  This is how dysfunctional DC works.

Fast-Track Trade Vote in House Set for Friday

The US budget deficit narrowed further in May as revenue continued to rise faster than expenses have over the past year, according to the Treasury Dept.  The budget picture has improved this year amid higher tax revenue & stronger economic growth, even though gov spending has also increased.  Revenue for the fiscal year, which began in Oct, is running 9% ahead of the year-earlier levels, while gov spending is up 6%.  Over the past 12 months, the budget deficit has fallen to $412B, down from $460B in Apr & $491B a year earlier.  That marks the lowest 12-month deficit since Aug 2008.  The US ran an $82B deficit in May, a month in which the gov has almost always run a deficit in recent decades.  The gov collected $212B in receipts, up 6% from a year earlier, & spent $295B, essentially unchanged after adjusting for calendar differences.  The brighter budget outlook means the deficit could fall below projections made just a few months ago.  The CBO forecast in Mar that the federal deficit would rise to $486B this year, from $485B last year.  Improving finances haven't so far altered gridlock in Congress, where Dems say that Reps' unwillingness to increase gov funding in next year's budget could lead to a gov shutdown when the fiscal year ends Sep 30.  Obama has said that spending should rise above the across-the-board caps that Congress agreed to 4 years ago & that any increases in the defense budget should be matched by increases in other domestic spending.  Reps in Congress last month approved a budget resolution, which doesn't require presidential approval, to keep in place the curbs, but added nearly $90B in spending via a separate account for war funding that isn't subject to the sequester.

U.S. Annual Budget Deficit Falls Near 7-Year Low

The ECB raised the amount of emergency funding for Greece's troubled banks by €2.3B as negotiations between Greece & its creditors reached a critical stage.  The ECB has been raising weekly a cap on the amount that local banks can draw from the Bank of Greece under the Emergency Lending Assistance (ELA) program, following heavy deposit withdrawals by worried savers.  The latest move authorized by the ECB increases the amount available from just €500B last week.  It takes the ceiling to €83.0B.  The ECB has raised the cap in increments, keeping pressure on Greece to strike a deal with its creditors over economic reforms required to unlock remaining aid under the €240B bailout program, needed to avert bankruptcy.  A leaker said the banks still had money in hand.  "There is an unused liquidity buffer of about 3 billion euros," the leaker said.  Greece & the EU & IMF lenders moved closer to the brink today, as the leaders of Germany & France put off an expected meeting with Prime Minister Tsipras to press for more concessions from the Greek side.

ECB Increases Emergency Funding for Greek Banks

Hope spring eternal in Europe.  There is hope that Angela Merkel will cave in to Greek demands & extend the massive bailout package.  Who knows where this is going?  But just those thoughts were enough to bring out buyers in droves.  The chart below shows Dow has not stayed far from the 18K trend line for months & today it's hugging that line.  Words are cheap, actions count.  The Greek debt mess remains in limbo.  At the same time there is a greater sense of awareness that the first step in raising US interest rates may be very near.  Bulls are happy that Dow is back in the black YTD.

Dow Jones Industrials

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