Markets score impressive gain on election day

Dow jumped 133, advancers over decliners 5-2 & NAZ added 12 (weighed down by a sagging Apple (AAPL) stock.  The Financial Index gained 2+ to the 217s, a 2 week high.  The MLP index rose 3+ to the 404s & the REIT index was up a fraction to the 262s.  Both indices have been flat for at least 2 months.  Junk bond funds were higher & Treasuries pulled back with the rising stock market.  Oil climbed to a 2-week high on forecasts that US gasoline supplies dropped after Hurricane Sandy forced the shutdown of East Coast refineries.  Gold jumped the most in almost 2 months as voters headed to the polls to elect a president & as the dollar declined, increasing demand for the precious metal as an alternative investment.

AMJ (Alerian MLP Index tracking fund)

 Treasury yields:

U.S. 3-month	0.092%
U.S. 2-year	0.290%
U.S. 10-year	1.738%

CLZ12.NYM

...Crude Oil Dec 12

...88.74

... 3.09

(3.6%)

Robert Shiller
Photo:  Bloomberg

The US housing recovery is a fragile one & should be spurred by reducing the role of gov in the mortgage-finance system, said Robert Shiller, professor at Yale & co-creator of the S&P/Case- Shiller index of property values.  “There are positive signs, the problem is that it’s not a really strong positive sign yet,” Shiller said on Bloomberg Television.  It is “not a resounding recovery,” he added   Americans bought new homes in Sep at the fastest pace in 2 years, indicating that the industry whose decline was at the heart of the recession is bouncing back.  Sales climbed 5.7% to a 389K annual pace, the most since Apr 2010, following a revised 368K rate in Aug, according to the Commerce Dept showed on Oct. 24.  “We have to get back to a private-sector mortgage market, without government dominance,” Shiller said. “We have to think about alternative mortgages that don’t invite the same sort of crisis where we have 10 million homeowners under water. We don’t want to put Americans in such leveraged positions.” 

Housing-Market Recovery in U.S. Not ‘Resounding,’ Shiller Says




Photo:   Bloomberg

Abbott Labs, a Dividend Aristocrat, sold almost $15B of bonds yesterday in the largest dollar-denominated offering in more than 3 years as the drug & medical-device maker prepares to split in 2.  Bonds were issued in 6 parts through its AbbVie pharmaceutical unit, ranging in size from $500M to $4B.  Proceeds will help fund a $7.7B tender offer related to AbbVie’s spinoff.  The portions include $500M of 3-year floating- rate notes priced to yield 76 basis points more than the 3-month London interbank offered rate & $3.5B of 1.2%, 3-year fixed-rate debentures to yield 85 basis points more than similar-maturity Treasuries.  In addition, the company sold $4Bof 1.75%, 5-year bonds at a relative yield of 110 basis points, $1B of 2%, 6-year notes at a spread of 140 basis points, $3.1B of 2.9%, 10-year debt at 130 basis points, & $2.6B of 4.4%, 30-year securities at 160.  The 6-year bond was added after the deal’s announcement.  When money is cheap, why not take advantage?   The stock lost 22¢ today.

Abbott Unit Sells $14.7 Billion of Bonds Ahead of Split

Abbott Labs (ABT)

Greece is back on the radar this week as its parliament agonizes over new austerity measures aimed at averting bankruptcy.  But analysts believe the $17B package may buy only temporary relief as its debt burden continues to grow.  Lawmakers will vote tomorrow on labor market reforms, including cuts to wages, pensions & severance terms, that will pile on the misery for Greeks whose living standards have been slashed by years of recession, soaring unemployment, falling salaries & rising taxes.  A budget for 2013 will then go before parliament on Sun.  Assuming Prime Minister Samaras' fragile coalition majority holds, eurozone finance ministers should release €31.5B from Greece's 2nd bailout at a meeting Nov 12, allowing it to redeem €5B in T-bills due 4 days later.  The deal would give Greece 2 more years to reach budget & debt targets set by the ECB, EU & IMF when the bailout was agreed to in Mar.  But this will leave a funding gap of €20-30 B, & with eurozone countries reluctant to put fresh money on the table, the problem may just be kicked further down the road.  The Greek economy has shrunk by about a 5th since 2008, adding more than 500K to the jobless total in a country with a population of just 10M.  The unemployment rate has more than tripled over the same period & now stands at 25%.  Nearly 3 in 10 Greeks were officially classified as "materially deprived" in 2011, up from just over 2 in 10 before the crisis hit, according to the Greek national statistics office.  Those figures are likely to have deteriorated still further this year.  Greece has already taken the knife to labor costs by cutting the minimum wage 22%.  Workers in the tourism & hotel sector agreed to a 15% cut in pay earlier this year.  The crisis has provoked violent protests in recent months & a mass strike by public & private sector workers this week.  Union leaders say the latest measures will simply suck Greece further into a downward spiral of economic contraction & poverty.  As said many times before, these problems are not going away anytime soon.

Greece's Misery Won't End With Bailout Vote


Stocks pretty much kept their early gains as the bears took the day off.  But AAPL bears are strong, dragging down the price of the stock to a $125 loss from its Sep highs (when it introduced the new version of iPhone, its top selling product).  Tomorrow the winner of the election should be known & markets return to watching economic data which has not been encouraging.

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Higher markets as votes are being cast

Dow shot up 156, advancers ahead of decliners 5-2 & NAZ was up 17   The Financial Index was up 2+ to the 217s (but sideways for about 2 months).  The MLP index rose 3 to 404 (some of the gain might come from a lack of ex-distributions today) & the REIT index was up a smidgen in the 261s (after trading sideways for months).  Junk bond funds gained & Treasuries slipped back.  Oil rose while gold is pushing to go over $1700 again.

AMJ (Alerian MLP Index tracking fund)

Treasury yields:

U.S. 3-month	0.102%
U.S. 2-year	0.278%
U.S. 10-year	1.695%

CLZ12.NYM

...Crude Oil Dec 12

...86.21

... 0.56

(0.7%)

GCX12.CMX

...Gold Nov 12

....1,690.10

... 7.90

(0.5%)

Today's Top Penny Stocks...FREE List!

Photo:   Bloomberg

Greece headed for a cliffhanger vote on austerity measures needed to keep the bailout on track as a 48-hour general strike began & European officials squabbled over the timing of a deal to unlock rescue funds.  EU Economic & Monetary Affairs Commissioner Olli Rehn, speaking at a meeting of G-20 finance ministers, said yesterday that a deal must be made at a meeting of EU finance ministers in Brussels on Nov 12.  But a European G-20 official, speaking before Rehn, cast doubt on the prospects for that deadline, saying officials may fall short.  Greece is under pressure to make more efforts to rein in its budget deficit & deregulate the economy.  While German Chancellor Merkel last month travelled to Greece to signal her willingness to keep Greece in the euro, the country is still struggling to hit its debt reduction targets amid a combination of Greek political resistance to more cuts and economic collapse.  Greece has received €240B ($307B) in aid pledges from the EU & IMF since 2010.  The parliament’s finance committee today agreed to fast- track a bill of austerity measures & economic reforms submitted by Prime Minister Samaras’s gov late yesterday.  Lawmakers must ratify the bill for Greece to ensure speedy payment of the next bailout & avoid bankruptcy, Finance Minister Yannis Stournaras said.  This story remains stuck in neutral.

Greece Faces Cliffhanger Vote as General Strike Begin

Photo:   Bloomberg

German factory orders fell the most in a year in Sep as Europe's sovereign debt crisis & slowing economic growth prompted companies to reduce investment.  Orders, adjusted for seasonal swings & inflation, slumped 3.3% from Aug, when they dropped a revised 0.8%, the Economy Ministry in Berlin said.  That’s the 2nd straight drop & the biggest since Sep 2011. The forecast was for a 0.4% decline.  From a year earlier, orders sank 4.7% when adjusted for work days.  Europe’s largest, is showing signs of weakness as govs & consumers across the region reduce spending, damping export demand.  Business confidence fell to the lowest in more than 21/2 years in Sep & the unemployment rate rose from a 2-decade low.  At the same time, Germany is weathering the debt crisis better than its euro-area counterparts thanks to exports to emerging markets & domestic demand.  German domestic factory orders fell 1.8% from Aug & export orders dropped 4.5%, driven by a 9.6% plunge in sales to other euro- area countries.  Investment-goods orders declined 2.4% & consumer-goods orders were down 1.7%.  Orders fell 2.3% in Q3 from Q2.  While bulk orders were below average in Sep, “the weak economic environment in the euro area and in the broader global economy is having a bigger impact on demand for German industrial goods,” it said. “Therefore industrial production may weaken further in the months to come.”  When the strong economy is struggling, the euro economy is in bad shape.

German Factory Orders Slump the Most in a Year: Economy




Photo:   Bloomberg

US job openings dropped to a 5-month low in Sep, signaling uneven progress in the labor market.  The number of positions waiting to be filled declined 100K to 3.56M from a revised 3.66M in the prior month, according to the Labor Dept said.  Hiring & layoffs also decreased.  Jobs may be harder to come by as more companies retrench in the face of a slowing global economy the fiscal cliff.  The figures show the Oct gain in private employment, the biggest in 8 months, will probably be difficult to sustain without faster economic growth.  The number hired in Sep dropped to 4.19M, pushing down the hiring rate to 3.1% from 3.3%.  Declines in job openings at professional & business services, gov & manufacturing accounted for much of the decrease in available employment.  Openings increased in education & health services as well as the trade, transportation & utilities industries.  Total layoffs, excluding retirements & those who left their job voluntarily, decreased to 1.7M from 1.85M a month before.  Another 1.98M quit their jobs in Sep, down from 2.15M in the prior month, driving the total separations rate to 3% from 3.3%.  In the 12 months ended in Sep, the economy created a net 1.8M jobs, representing 51.6M hires & 49.8M separations.  More gloomy data on the economic recovery.

Job Openings in U.S. Decreased by 100,000 in September


While waiting for the election results,sellers decided to watch from the sidelines.  News is on the dismal side, especially out of Europe, but buyers are not worried.  Independent of the election results, the fiscal cliff (bringing tax increases & budget cuts) will start looming larger tomorrow.  But Dow continues at the high end of an 8 day narrow trading range.  Maybe sellers will return after lunch.

Dow Jones Industrials