Monday Morning Musings
The market is higher in early trading after the 2-day pullback seen at the end of last week. I prefer a market that opens weak and ends strong, so let's see if the early gains can hold until the end of today's trading session.
The fiscal cliff talks continue. House Speaker Boehner offered a tax hike for top earners (over $1M) if new revenue was met with spending cuts. But the White House rejected the offer, so even though discussions continue I'm not sure how much headway is being made.
In M&A news, Caribou Coffee (CBOU) is being acquired by a private equity firm for a 30% premium to Friday's close.
In economic news, the Empire Manuf. survey for December came in at -8.1, which is down from last month's reading of -5.2 and well below estimates. It is not clear if the figure has been effected by Superstorm Sandy.
Overnight Asian markets were mixed. China bounced +0.5% despite the new leadership there saying they may be more tolerant of slower growth. This comes as the country is set to see its lowest growth rates since 1999. The problem is that China needs the fast rates of growth to create millions of jobs required for all of the citizens moving to the cities from rural areas.
In Europe markets are generally lower this morning. Germany's Bundesbank said the country's economy will suffer a notable contraction in Q4 and reiterated it sees the German economy growing at just 0.4% in 2013.
Apple (AAPL) is lower again this morning as it tests the $500 level. Sometimes a stock needs a notable downgrade to bottom, and today it might have received it from Citigroup. The analyst downgraded the stock to Neutral from Buy, but this downgrade comes just weeks after Citi initiated coverage of the stock with a Buy. AAPL remains up +25% for the year.
Commodities are mixed. Gold prices are up fractionally to $1700. Oil prices are higher near $87.50. But silver and copper prices are lower.
The 10-year yield has held above its 50-day and is higher today to 1.72%. It's nice to see that the 10-year yield is well above its July lows as folks start to question economic growth in 2013.
Trading comment: The market should be able to bounce here. The S&P 500 just retested its 50-day average support, which is a logical technical level from which to bounce. As of this post, AAPL is trying to bottom and rebound on the day. If AAPL goes positive that would add fuel to the bulls' fire. GOOG isn't being talked about at all, but its price action has been very solid. Today it is up another $13 to $715. Not bad at all.
KAM Advisors has long positions in AAPL and GOOG