Dow dropped 251, decliners over advancers 3-1 & NAZ declined 46. The MLP index fell 5 to the 183s & the REIT index was off 4+ to the 441s. Junk bond funds barely budged & Treasuries were sold, taking the yield on the 10 year Treasury over 1.5%. Oil lost 1+ to the 77s & gold was steady at 1761,
AMJ (Alerian MLP index tracking fund)
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The building battle over how to raise the debt ceiling will come later today when Reps are expected to filibuster a procedural vote on raising the debt ceiling. The vote will require 60 yeas. But Reps have been very clear that they intend to vote against it uniformly. As punishment for spending Ts of $s without GOP input via budget reconciliation, Reps want Dems to use the same process to raise the debt ceiling. Minority Leader Mitch McConnell says the Reps have no demands & do not intend to compromise – they are locked into their protest. And even the most moderate GOP members like Sen Mitt Romney are on board with the strategy. "There is already an existing carveout where Democrats can do it themselves—it’s called reconciliation," Romney tweeted in response to a commentator suggesting Dems change the filibuster to raise the debt ceiling. So Dems' plan will fail. And with 12 days until the US will default on its debt, according to Treasury Secretary Janet Yellen, they do not have another one.
Vote to advance debt limit increase to fail in Senate Wednesday
US private-sector hiring accelerated in Sep as supplemental unemployment benefits expired. The
US economy added 568K private-sector jobs last month, up from a
downwardly revised 340K in Aug, according to the ADP National
Employment report. The forecast
expected the addition of 428K jobs. "The labor market recovery
continues to make progress," said Nela Richardson, chief economist,
ADP. "Leisure and hospitality remains one of the biggest beneficiaries
to the recovery, yet hiring is still heavily impacted by the trajectory
of the pandemic, especially for small firms." Service-sector
hiring accelerated last month with the addition of 466K jobs, up from
329K in Aug. The gains were paced by the leisure & hospitality
sector, which added 226K new workers, up from last month's 201K
new hires. Education & health services (+66K), professional &
business services (+61K) & trade, transportation & utilities
(+54K) also saw robust hiring. Hiring by the goods-producing
sector also accelerated, with 102K new workers last month, led by
manufacturing (+49K) & construction (+46K). Job
gains picked up for large-sized businesses (+390K), but slowed for
small- (+63K) & medium-sized (+115K) businesses. The improvement in hiring comes after the $300 per week in supplemental
unemployment benefits expired on Sep 5. The extra payments allowed
some workers to make more money by staying at home than from being
employed.
Even from the porch of his home in Malibu, toy executive Isaac Larian can't escape this holiday season's biggest business challenge. He can see a long line of container ships idle at the Port of Los Angeles, about 70 miles away. Larian, CEO of MGA Entertainment, said the congested port has been a persistent view off the California coast since at least May. As he tries to relax & watch the sunset, it's a constant reminder of the many toys that have yet to arrive. The delay in unloading the ships could jeopardize whether parents can buy the toys in time to wrap up & tuck under the Christmas tree. If they miss the opportunity, toys could linger on shelves with clearance stickers deep into the winter. “I can see an ocean full of containers,” he said. “Ship after ship after ship full of containers waiting to unload.” He said the company currently has enough inventory to meet around 65% of its outstanding orders. He said MGA Entertainment anticipated 50% sales growth this year, but now expects to grow by 18-20%. Larian is just one of many toy manufacturers grappling with a massive bottleneck in the global transportation pipeline caused by the coronavirus pandemic & worsened by the blockage of the Suez Canal in Mar. Shipping containers that once cost $3200, now sell for north of $20K. And even when containers are unloaded, there aren't enough truckers to deliver those shipments. Power outages in China, a resin shortage & higher labor costs have also strained the supply of goods & increased prices. “It’s a really, really complex set of problems that has a chain effect and I’m afraid that this will continue for a long time,” Larian added. No company is immune. Larger ones do have more resources & some have gone so far as to contract dedicated container ships to expedite their orders. Larger companies also have the cash to place orders well in advance of when the items are needed. Execs have stressed the big toy companies are better equipped to handle these challenges.
Those guys in DC are something else. The debt ceiling drama has been lingering for months, &, now late in the game, they are trying to get serious about solving the mess. A 3rd grade class could have handled this better. Instead, the ugly drama will drone, maybe even past the deadline. Too bad planning is being replaced by waiting to the last minute to solve the problem. The Dow chart below is not pretty & more selling pressure lies ahead.Dow Jones Industrials
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