U.S. Equities Experience a Minor Relief Rally as Fiscal Cliff Talks Get Underway

“U.S. stocks rose, erasing earlier losses, as House Speaker John Boehner said he had constructive talks with President Barack Obama on the budget and would accept government revenue increases coupled with spending cuts.

American Express  (AXP), UnitedHealth Group Inc. (UNH)and Alcoa Inc. (AA) added at least 1 percent to pace gains in the biggest companies. Facebook Inc. (FB) climbed 5.7 percent as it expanded the roster of retailers that let users buy and send items to their friends on its website. Dell Inc. (DELL)sank 6.8 percent as its revenue forecast missed analysts’ projections estimates. Sears Holdings Corp. (SHLD) plunged 21 percent after the retailer posted a wider loss and its 23rd straight quarterly sales decline.

The Standard & Poor’s 500 Index rose 0.2 percent to 1,356.15 at 2:59 p.m. New York time. It has fallen 1.9 percent this week. The Dow Jones Industrial Average gained 15.99 points, or 0.1 percent, to 12,558.37. Trading in S&P 500 companies was 23 percent above the 30-day average at this time of day.”

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“House Speaker John Boehner offered a “framework” including new revenue to reduce the U.S. budget deficit during talks with President Barack Obama and Congress leaders on averting a year-end fiscal crisis.

Boehner joined White House Press Secretary Jay Carney in describing today’s meeting, the first in a series, as “constructive.” The session featured the same actors, including House Minority Leader Nancy Pelosi and Senate Majority Leader Harry Reid, both Democrats, who failed to reach a $4 trillion debt compromise in mid-2011.

Democrats and Republicans agreed the meeting was more symbolic than substantive. It was “a photo op for the president, so be it,” said Georgia Republican Tom Price.

“I wouldn’t expect a lot of movement,” Peter Orszag, Obama’s former director of the Office of Management and Budget, said today on Bloomberg Television. “That’ll come after Thanksgiving.” ”

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We used to be a nation of “can do,” of taking action…. it seems now we will have talks about talks to resume failing talks on how talks can lead to resolution of can kicking behavior…

Gapping up

SHF +30.3%, PENN +25.6%, COGO +10.9%, MRVL +6.5%, CLDX +6.1%, ATW +4.6%,

KCG +3.8%, GPS +3.7%, AMAT +2.9%, HLSS +2.8%, POZN +2.1%, INTU +1.8%,

ADSK +1.6%, NKE +1.1%, DISH +1.1%, NLY +0.8%,

Gappng down

DVAX -56.8%, SHLD -7.3%, STP -6.2%, SINA -6%, NAK -3.8%, DELL -2.5%, FB -0.8%,

FTR -4.6%, WIN -2.7%, JCP -0.8%, SOHU -1.2%, BIDU -0.2%,

AEO, NLY, CMO, CHKP, CIT, DRYS, FSP, FTR, GPS, HTS, IVR, JBLU, MFA, NTAP, PANW, RSG, SDRL, TGI,

Full report

In Play ,

On the Wires

“Today’s AM fix was USD 1,710.00, EUR 1,342.76, and GBP 1,077.91 per ounce.
Yesterday’s AM fix was USD 1,723.50, EUR 1,351.45, and GBP 1,087.66 per ounce.

Silver is trading at $32.32/oz, €25.48/oz and £20.46/oz. Platinum is trading at $1,554.50/oz, palladium at $624.80/oz and rhodium at $1,095/oz.

Gold fell $11.00 or 0.64% in New York yesterday and closed at $1,714.00. Silver slipped to a low of $32.166 and finished with a loss of 0.15%.

Gold and silver have traded a bit lower on Friday and are both heading for a loss of 1% on the week in dollar terms. This is to be expected after the 3% and 5% returns of last week and the trading action this week has all the hallmarks of consolidation.

Interestingly, the sharp falls seen in the Japanese yen this week have created the unusual situation of gold and silver prices being nearly 1% higher in yen terms while lower in most fiat currencies.

The jobless claims numbers were higher than expected (439K vs 338K) yesterday and Superstorm Sandy’s wrath may have worsened an already weakening US economy. Unemployment benefits grew by 78K for the week ending November 10th.

Many of those who lost their jobs were unable to immediately file claims due to the dislocation caused by the storm.  Sandy led to over 100 deaths, left no power in many homes, curtailed rail or subway services and insurance losses estimated are between $20 billion and $50 billion.

US industrial output figures for October are published at 1415 GMT.

If the US fiscal cliff isn’t sorted out it will weigh on the dollar and benefit gold however the fiscal cliff is just the preliminary bout in many challenges facing the $16.15 trillion indebted US economy.

The CME Group cut margins on gold and silver futures contracts in a bid to ignite trading interest which is bullish from a contrarian perspective.

Gold demand is still strong.  The SPDR Gold Trust holdings grew to 1,339.616 tonnes by Nov. 15, just a tad off the record high of $1,340.521 tonnes hit in October.

John Paulson kept a major stake in gold in Q3 2012, a confidence boost to bullion’s appeal as a hedge against economic uncertainty, a US regulatory filing showed on Thursday.

While John Paulson kept his current stake in the SPDR Gold Trust (NYSE:GLD), Soros increased his holding in the gold trust by 49% to 1.32 million shares.

Soros and his team, unlike many “experts”, clearly believe gold is not a bubble and will protect and grow his wealth in the coming years.” ”

Full article and charts

“The improving housing market is “far from being out of the woods,” Federal Reserve Chairman Ben Bernanke said, arguing that overly tight lending standards are part of the problem.

The Fed, which has focused on mortgage bonds in its latest round of asset purchases, will continue to do what it can to support the housing market, Bernanke said in a speech that avoided policy specifics.

A bubble in the U.S. housing market was at the core of the 2007-2009 financial crisis and brutal recession that continues to hamper the world economy. Data in recent months, however, have shown the sector is on the mend.”

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“Looks like job recruiters gave a big thumbs up to Facebook, as the social-networking company has now branched out to post job listings.

The company released a Social Jobs Partnership application working with the U.S. Department of Labor and other government agencies. Other aggregators already working on the platform include Work4Labs, BranchOut, Jobvite, DirectEmployers and Monster.com.

Wednesday, the first day the app went live, saw 1.7 million jobs go up on Facebook, Forbes reported.”

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“Despite Washington gridlock, the eurozone debt debacle and the weak global economy, David Rosenberg, chief economist and strategist for Gluskin Sheff, sees one compelling reason to buy stocks.

The reason is simple: low interest rates.

In a nutshell, interest rates are so low that stocks are irresistible, Rosenberg wrote in the Financial Times. ”

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“Pacific Investment Management Co.’s Mohamed El-Erian said the Federal Reserve will expand its bond purchases to include Treasurys by early next year.

The central bank in its December or January Federal Open Market Committee meeting will announce plans to add Treasury purchases to the $40 billion in mortgage-backed securities it is now buying in its third round of quantitative easing, known as QE3, El-Erian, chief executive officer of the world’s biggest manager of bond funds, said in an interview on Bloomberg Television’s “In the Loop” with Betty Liu. The Fed will also take additional steps to improve transparency in communication of the path of monetary policy, he said.

The Fed may continue in January with the Treasury purchases that are now part of the central bank’s maturity extension program, known as Operation Twist, discontinue the sales, or let the program end and add Treasuries to its QE3 purchases, according to El-Erian. The Fed is buying $45 billion in long- term debt each month as part of Twist. The program is slated to end on Dec. 31.

“Expect QE to be expanded,” he said. Also “look for them to try and take a step forward on quantitative thresholds,” said El-Erian, referring to the Fed’s likely move away from targeting short-term rates to a calendar date and to measures such as employment or inflation.”

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“The Federal Housing Administration’s projected losses hit $16.3 billion at the end of September, according to an independent annual audit to be released Friday, a much larger figure than had been forecast earlier.

The report suggests the FHA will require taxpayer funding for the first time in its 78 years, though that won’t be decided until early next year.

Housing officials said late Thursday they would announce a series of steps on Friday to raise revenue and avert such a milestone. Those steps are likely to raise the cost of FHA-backed mortgages for future borrowers.

The FHA is required to maintain enough cash to pay for projected losses on the $1.1 trillion in loans that it guarantees. Last year, the independent audit said the FHA would have $2.6 billion after covering estimated losses.

But the latest forecasts show that while the FHA currently has reserves of $30.4 billion, it expects to lose $46.7 billion on the loans it has guaranteed, resulting in a $16.3 billion deficit.

The report is likely to unleash a political fight over the government’s role backstopping the housing market, which already has required taxpayers to spend $137 billion to rescue Fannie Mae FNMA -0.36% and Freddie Mac FMCC +2.15% . Together with Fannie and Freddie, federal agencies are backing nearly nine in 10 new mortgages.

“If [the FHA] were a private company, it would be declared insolvent and probably put under conservatorship like Fannie and Freddie,” said Thomas Lawler, an independent housing economist in Leesburg, Va.”

Full article

“White House officials are in advanced internal discussions about a plan to replace the sweeping spending cuts set to begin in January with a smaller, separate package of targeted spending cuts and tax increases, people familiar with the planning said.

The spending cuts, known as the “sequester,” will begin in January unless the White House and Congress intervene. They would cut spending by roughly $100 billion next year, and then for eight additional years, hitting a number of federal programs, including military programs, embassy security and state aid.

Critics of the cuts, which were put in place by last year’s Budget Control Act deal to raise the debt ceiling, have said they could derail what remains a weak economic recovery. Democrats and Republicans have separately tried to design plans to replace the sequester.

The discussions are just one part of a complicated set of possibilities as Washington deals not only with the looming spending cuts but also the expiration of the Bush tax cuts and other traditional year-end priorities, such as finding a way to halt the scope of the Alternative Minimum Tax. While moving along separate tracks, it is also possible these three policy issues could be wrapped up into one universal deal.

The White House is set to start negotiations with Republican and Democratic congressional leaders Friday.”

Full article

“U.S. regulators are expected to serve a formal notice to JPMorgan Chaseaccusing the nation’s biggest bank of having weaknesses in its anti-money-laundering systems, The Wall Street Journal reported, citing people close to the situation.

Office of the Comptroller of the Currency’s (OCC’s) cease-and-desist order to JPMorgan[JPM  Loading…      ()   ] is part of a broader crackdown on the nation’s largest banks, the people told the paper.

The OCC is expected to require JPMorgan to beef up its procedures and examine past transactions, the Journal said.

Investigators and regulators are examining risk controls surrounding a multibillion-dollar trading loss within the company’s Chief Investment Office.

The authorities are also probing whether a JPMorgan energy unit manipulated trading markets in California and how the bank’s Bear Stearns unit packaged and sold home loans to investors before the financial crisis, the paper said.”

Full article

“In his U.S. Equity Strategy Weekly note last week, RBC Capital Markets’ Myles Zyblock wrote about how it is becoming increasingly difficult to be a good stock picker (i.e.someone who doesn’t just invest in index funds).

“At a basic level, we highlight the trend increase in performance correlation as an important marker of this phenomenon,” he writes.

In other words, stock market investors are increasingly producing similar returns.”

Full article and charts

“Hostess Brands Inc., the maker of Wonder bread and Twinkies, said it will shut down and liquidate after a strike by members of its bakery workers’ union “crippled” the company’s operations.

“We deeply regret the necessity of today’s decision, but we do not have the financial resources to weather an extended nationwide strike,” Chief Executive Officer Gregory F. Rayburn said in a statement.  “Hostess Brands will move promptly to lay off most of its 18,500-member workforce and focus on selling its assets to the highest bidders.”

The Bakery, Confectionery, Tobacco Workers and Grain Millers International Union went on strike Nov. 9 after a bankruptcy judge in White Plains, New York, imposed contract concessions that 92 percent of the union’s workers rejected.”

Full article

“The foreign-exchange market is signaling to Citigroup Inc. (C) that it isn’t yet convinced theFederal Reserve will fulfill its pledge to keep pumping record amounts of cash into the U.S. economy through 2015.

The U.S. Dollar Index has gained 2.5 percent since the central bank said Sept. 13 it would keep interest rates at record lows through mid-2015 and print $40 billion a month to buy bonds, a policy that debases the currency. Higher-yielding currencies from the Czech koruna to Poland’s zloty that benefited from such actions in the past are weakening.

While the Fed said it will keep the stimulus going even after data show the economy is improving, the foreign exchange market indicates that gains in U.S. employment, housing andconsumer confidence may prompt changes in policy sooner. The dollar will rally next year versus the euro and yen, based on the median estimate of more than 50 strategists from Barclays Plc to Nomura Holdings Inc. surveyed by Bloomberg.

“Does the market really believe that the 2015 Fed is going to be constrained by the 2012 Fed?” Steven Englander, Citigroup’s New York-based global head of G-10 strategy, said in a telephone interview from New York. “The answer is ‘no.’” ”

Full article

“A majority of Brazilian companies missed earnings estimates for a third straight quarter, signaling President Dilma Rousseff’s interventionist policies have failed to spark the economic rebound she is seeking.

Fifty-eight percent of the 62 companies on the Bovespa index that reported third-quarterearnings have trailed analysts’ forecasts, according to data compiled by Bloomberg. Sixty-two percent fell short of projections in the second quarter this year, and 60 percent missed estimates in the first.

Rousseff’s pressure to boost consumer credit at lower costs hurt profits at lenders includingItau Unibanco Holding SA (ITUB4), Latin America’s largest, as three of the four banks that have reported posted quarterly earnings that were below projections. Pulp producer Suzano Papel & Celulose SA missed estimates by the widest margin, leading disappointments among materials producers as a slowdown in China, Brazil’s biggest trading partner, led to a 12 percent drop in exports.”

Full article

“Oil headed for the fourth weekly decline in five in New York as signs of a slowing economy in the U.S., the world’s biggest crude user, countered concern that tension in the Middle East will disrupt supplies.

West Texas Intermediate futures were little changed after falling 1 percent yesterday as a report showed U.S. unemployment claims climbed to the highest level since April 2011. Crudestockpiles grew last week to the highest since July as output rose to an 18-year high, according to the Energy Department. Oil pared losses after Israel said it’s ready to escalate military operations against Gaza.

“Supplies are overwhelming while demand is non-existent,” said Andrey Kryuchenkov, a London-based analyst at VTB Capital who predicts WTI may slip to $84 a barrel this month. “Geopolitical risks are hopefully going to subside, and so ultimately macroeconomic and demand concerns will still dominate the agenda.”

WTI for December delivery, which expires today, slipped 15 cents to $85.30 a barrel in electronic trading on the New York Mercantile Exchange at 12:28 p.m. London time. The January contract dropped 14 cents to $85.73. The front-month future dropped 87 cents yesterday to $85.45 and is down 0.9 percent this week. Prices have retreated 14 percent this year.

Brent for January settlement on the London-based ICE Futures Europe exchange rose 28 cents to $108.27 a barrel. The front-month European benchmark grade was at premium of $22.55 to the corresponding WTI contract, from $25.53 yesterday.”

Full article

developing…..