Friday, November 9, 2012 - Article by: Anthony - Equity Investment Capital -
More selling of equities yesterday and early this morning; the DJIA futures at 9:00 -61 points, but by 10:00 the index was better on the day. The 10 yr note and mortgage rates continue to fall as investors are leaving the equity markets and parking money in treasuries, in turn improving mortgage rates. Markets facing a number of issues, non are good for the markets and it isn't just in the US, markets in Europe are down again this morning. The fiscal cliff is the giant in the room but the situation in the EU with Greece about to run out of money pressuring markets, the ECB's Mario Draghi saying the ECB is done with Greece in terms of buying its debt, saying it is now the responsibility of the EU nations to provide Greece with the needed cash to avoid default. Europe's economic outlook has been revised lower by the European Commission, adding another reason to exit equities. Germany's government bonds advanced, pushing 10-year yields to the lowest level in more than two months (1.32%), as reports showed industrial production slumped in France, Italy and Finland. In China there is a change in the leadership with a new President and Prime Minister, its economy has slowed and uncertainty heightened with the changes. Here in the US there is a growing belief in the markets that capital gains taxes will be increased next year and increased taxes on gifts and inheritance taxes are likely. All of those issues are driving global equity markets down, markets are presently expecting the worst outcomes.
This afternoon at 1:00 President Obama will address the nation, the first since the election; how he phrases his remarks will be key. Will he offer up an olive branch or stick to his ridged insistence that taxes be increased on the rich and showing little interest in cutting spending? If he appears more conciliatory and willing to negotiate with Republicans the present mood of fear will ease somewhat. Prior to his address, at 11:15 House majority leader John Boehner will speak; he too must demonstrate an increased willingness to cooperate to avoid the fiscal cliff. It is way past time for the two parties to sit down and do the peoples work instead of the gridlock that has dominated the last two years-----we'll see.
October import prices were unch from Sept; yr/yr +1.4%. Export prices +0.5%; yr/yr +0.4%.
At 9:30 the DJIA opened -66, NASDAQ -5, S&P -4. The 10 yr note unchanged at 1.61% after being lower earlier to 1.57%; 30 yr MBS prices also slipped a little from early on, at 9:30 -9 bp.
At 9:55 the mid-month U. of Michigan consumer sentiment index, expected at 83.0, it increased to 84.9, best since July 2007.
At 10:00 Sept wholesale inventories expected +0.4% increased 1.1%; August inventories revised from +0.5% to +0.8%.
The stock market has improved frm the early levels; the sentiment index better and wholesale inventories better took some of the bearish away for the moment. The addresses frm John Boehner and President Obama will be closely monitored for any indication of compromise between the two leaders.
Equity Investment Capital
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