Monday, November 05, 2012

Monday Morning Musings

The market is off to a bit of a weak start this morning likely due to the uncertainty over the US presidential election tomorrow. 

In economic news, the October ISM Services index came in at 54.2, which was below expectations and down from last month's reading of 55.1.

On the M&A front, KBW announced a merger with Stifel Financial (SF) at a 7% premium to Friday's closing price.

Markets were mostly lower in Asia overnight ahead of the US election as well as the hand-off in power Thursday to the 18th National Congress in China.  China also released its services PMI over the weekend, which rose to 55.5 from 53.7.  In Japan, shares of Sharp plunged 7% after getting a 6-notch downgrade from Fitch, which warned about the company's ability to survive.

European markets are also weak this morning after German Chancellor Merkel suggest the euro crisis could still drag on for another 5 years.  Also, the IMF is reportedly urging Greek debt holders to take a haircut on their bonds in order to help Greece reach sustainable debt levels.

Shares of Apple are trading higher after the company said it sold 3 million iPads over the weekend, a new record.  This figure included the new iPad minis as well as the other larger iPads.

The dollar is higher today, but commodities are mixed.  Oil prices are up to $85 and gold prices are also higher near $1683.  Copper prices are lower.

The 10-year yield has slipped back below its 50-day average to 1.68%.  The volatility index is up 3.6% to 18.25.

Trading comment: The market continues to trade thin and cautiously ahead of the election tomorrow.  The polls show the race being very tight, probably too tight to call.  But I think that the markets could be poised to enjoy a relief rally regardless of the outcome only because either way this element of uncertainty will be removed.  I'm not sure how far any relief rally can carry us since we still have the fiscal cliff ahead to deal with.  But let's focus on a potential rally first.

KAM Advisors has long positions in AAPL


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