Are Markets Too Complacent?

The markets were down in early trading and the selling was slowly picking up until members of Congress appeared on TV and the markets bounced.  We didn't hear anything definitive mentioned, but markets don't seem too worried about nothing getting done past the debt ceiling deadline on October 17th.  This causes us to wonder if investors are being too complacent?

The Senate said they have been making progress on a bill while the House said that it is going to take up its own bill.  On the surface this would seem to delay things more.  But at this point who really knows.

In economic news, the Empire Manuf. index for October declined to 1.5 vs. last months reading of 6.3.  The Fed's Fisher said economic data will likely be lumpy for the next couple months.  Also, he said that he would not support any taper at the October meeting due to the govt shutdown.

Despite the no taper news, the yield on the 10-year T-note is higher today to 2.72% after the bond market was closed yesterday.

The volatility index is fractionally higher to 16.30 currently.

In earnings news, SCHW, JBHT, JNJ, OMC, C, and KO are trading higher after reporting earnings.
DPZ, FRC, and TDC are all trading lower after their announcements.

Asian markets were mixed overnight.  The Bank of Australia said it was pleased with the way recent rate cuts are working.  And Nomura said the PBOC might look to tighten monetary policy in China in November.

Europe's markets are mostly higher today. 

The stronger dollar today is weighing on commodities.  Oil prices are weaker to $102 while gold prices are also down a bit near $1270.

Trading comment: Hard to commit cash ahead of the dysfunction that is going on in Washington.  While we are in the business of forecasting markets at least to the extent that we can attempt to assign some probabilities to things, it is extremely hard to game the debt ceiling negotiations.  We would like to think that everyone in Washington understands the severity of any sort of default.  But the notion of compromise seems a bit lacking these days, so we again have to go down to the wire and hold our breath that cooler heads prevail.  While we are always looking for attractive individual situations that arise in the market, we are not making any large scale bets ahead of the debt ceiling.