Wednesday, December 11, 2013

Investors Yawn At Proposed Deal In Washington

Markets are lower in early trading, despite news that lawmakers have reached a deal in Washington that would avoid another govt shutdown taking place in January.

The deal is for a 2-year budget agreement that would reduced the sequester cuts by $63 billion and lower the deficit by roughly $20 billion.  The deal has yet to be approved by Congress, and maybe that is why Wall St is skeptical.  It's one thing to cobble together a deal, but another to get this dysfunctional Congress to approve anything ahead of a looming deadline.

In corporate news, Costco (COST) is trading lower after missing earnings estimates.  Retailers are mixed following the news.  Separately, MasterCard (MA) is 4% higher after announcing a 10-for-1 stock split, increasing its quarterly dividend by 83%, and announcing a new $3.5 billion share repurchase program.  A 10-1 stock split is big.  I wonder if it will spur any other high priced stocks (GOOG, PCLN, AAPL) to consider a split.

Asian markets ended lower last night.  The pollution in China has gotten really bad and the govt is making some noise about tighter controls over coal consumption. 

Europe's markets are mildly higher.  Germany's CPI ticked up 0.2% putting the yearly rate at 1.3%.  Not much inflation.

The 10-year yield is up slightly to 2.82%.  And the volatility index is spiking another 6% taking the VIX up to 14.77, still shy of the 15 level we have spoken about.

Commodities are mostly lower, with oil prices just below $98 and gold prices down a bit near $1257.

Trading comment: For folks who have been looking for the fabled Santa Claus rally, a pullback in the market here would be just what the doctor ordered.  If we could have an orderly decline for a little bit here, and work off some of the overbought scenarios in many stocks that could set the market up nicely for another end of year push higher later this month.  The SPX is just below its 20-day moving average, where it has found support recently.  So we will need to watch these levels for the next couple days to see if the market finds support again or if a trip to lower levels is in the cards.  Next support levels probably come into play at SPX 1775.


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