Monday Morning Musings

Markets are lower this morning amid little progress in the debt ceiling debates.  After the Senate passed a stopgap funding bill without a provision to defund Obamacare, the House countered by adding a one-year Obamacare delay to the funding bill.

With a midnight shutdown looming, we should hear lots of back and forth today as the story unfolds.  It would be the first govt. shutdown in 17 years if it does occur.

Overnight Asian markets were mostly lower.  China's HSBC manuf. PMI slipped to 50.2 from 51.2.  Markets in China will be closed for the rest of the week for Golden Week.

Turmoil in Europe is also weighing on their markets.  In Italy, the govt. has nearly collapsed after PDL leader Silvio Berlusconi withdrew from the coalition along with several of his party's key ministers.  Elsewhere the head of one of the Greek parties was arrested and charged with belonging to a criminal organization.

Despite the global turmoil, we are not seeing the traditional flight to safety.  Treasury prices are a bit lower and pushing yields on the 10-year Note higher to 2.63%.  Gold prices are also weaker today near $1327.  Oil prices are also lower to $101.65.

But the volatility index has spiked higher.  Last week when the VIX was hovering around 14 we said we would not be surprised to see a spike higher in the near-term.  Today the VIX is up 8% to 16.75 and was above 17 early in today's session.

Trading comment: We doubt that all of the shenanigans out of Washington will dent the fundamental improvement in the global economy that have been driving stocks higher this year.  So we want to use this hiccup in investor sentiment to add to equities with the premise that stocks will still be higher at year-end than they are today.  The S&P 500 is testing its 50-day average today also, which is often a support level where we see buyers step up.