As Syria and Israel trade fire, Greece is suddenly at play again due to IMF static, and the fiscal cliff remains unresolved. For these reasons and the other potential catastrophes that could catalyze down the road, stocks were lower in Asia and Europe in Tuesday trade. Early published U.S. economic data might help hold American stocks up this morning, but the speeches of President Obama and Congressional leaders will likely dictate how it closes. In early trading, the SPDR S&P 500 (SPY), SPDR Dow Jones Industrial Average (DIA) and the PowerShares QQQ (QQQ) were modestly lower.
EURO STOXX 50: -0.6%
Hang Seng: -1.1%
FTSE 100: -0.6%
Nikkei 225: -0.2%
German DAX: -0.9%
S&P/ASX 200: -1.5%
The IMF is playing hardball with Greece, demanding a better long-term debt management plan be worked out to ensure its repayment. Greece's European partners, dependent on the future of Greece, have given it a couple more years to meet budget goals. That's something we suggested more than a year before Europe realized it would be necessary. Perhaps, eventually, the IMF and EU will realize that forced austerity during deep recession was not a good idea to promote economic growth and recovery as well; and hopefully it won't be before Greeks vote in a government that will make a new path first. In any event, European shares are struggling today due to the re-born issue that is Greece and the European domino demise effect waiting to be set off if Greece should fail (by its creditors' standards).
Thanks to a duo of benign to slightly positive American economic data points, and some select earnings reports, American stocks have some support this morning and are only slightly in the red broadly speaking.
The National Federation of Independent Business (NFIB) Small Business Optimism Index improved by 0.3 points in October, to 93.1. Make no mistake, the index continued to reflect a pessimistic attitude among small businessmen at the latest level. Also, the survey was closed before the presidential election, and likely reflects some perspective of the result that conflicted with how things played out. If taken today, I expect this index would deteriorate substantially. Still, it acts as a support for as long as investors don't realize this at the majority. This can last from a matter of minutes to a period of weeks, depending on how widely followed the topic is by media and pundits. However, the market's disappointment with the presidential result has already been discounted and well documented.
The International Council of Shopping Centers (ICSC) recovered post Hurricane Sandy. The latest reporting for the period ending November 10th showed the index improved to report growth of 0.7%, versus the prior week's contraction of 0.2%. That left the year-over-year growth rate improved to a still mediocre 1.8%, versus the prior week's 1.4%. Redbook marked that year-to-year rate at 1.6%, versus 0.8% from the week before. No matter which reading you believe, the message is the same. Still, Home Depot (HD) lifted the housing and retail group, as the company raised its full year outlook on improved real estate investment and the impact of Hurricane Sandy reconstruction efforts. Lowe's (LOW) was likewise lifted on the news, and is the company we favored most in a recent report. It just goes to show that one company's pain can be another's gain.
Later today, at 2:00 PM ET, the Treasury Department will report on the monthly Treasury Budget. A seasonal September surplus of $75 billion is expected (by economists) to be followed by an October deficit of $113 billion. Year-to-date, the deficit stands at $1.3 trillion, with October set to close out the fiscal period. This should only serve to remind the market of the issues we have with the budget, and the long-term ramifications that remain threatening.
Federal Reserve Vice Chair Janet Yellen will discuss central bank communications and take questions during a visit to Berkley's Haas School of Business. I do not expect much of a market impact from her comments.
The corporate wire has Best Buy (BBY), Humana (HUM), Mattel (MAT), Xerox (XRX), Boeing (BA), Celgene (CELG) and Red Hat (RHT) discussing operations with investors or analysts. As these events are better described as sales pitch than operations analysis, the stocks might get some lift generally speaking. The day's earnings wire highlights reports from Cisco Systems (CSCO), Dick's Sporting Goods (DKS), Home Depot , Idera Pharmaceuticals (IDRA), Navios Maritime Acquisition (NNA), Renren (RENN), TJX Cos. (TJX) and many more names.
Before the day closes, I expect stock action will be dictated by the discussion of the Democratic and Republican Congressional leaders and their marking of the "lame duck session". Obviously, it shouldn't be called that this year, but it continues to be referred to as such in the media. The President may also find a microphone today after he meets with labor leaders to discuss the fiscal cliff. The market will be betting broadly long or short on the day-to-day developments regarding the fiscal cliff, so keep your eyes on Washington.