Our leaders in Washington finally lived up to that description with key figures coming to the table and making big boy (and girl where applicable) decisions. There was some pouting by certain figures but at the end of the day the central figures stepped up to the plate and pulled America's leaders together to pass the necessary legislation to avert going over the fiscal cliff. This is how Washington is supposed to work, with two sides coming together and compromising. Expect a large rally today followed with strong markets over the next few weeks as capital moves back in and bears are forced to lick their wounds.
We have economic news due out today, and it is as follows (these are the consensus estimates):
- Redbook (8:55 AM EST): N/A
- ISM Index (10:00 AM EST): 51.0
- Construction Spending (10:00 AM EST): 0.5%
- Auto Sales (2:00 PM EST): N/A
- Truck Sales (2:00 PM EST): N/A
- FOMC Minutes (2:00 PM EST): N/A
Asian markets finished higher today:
- All Ordinaries - up 1.25%
- Shanghai Composite - up 1.61%
- Nikkei 225 - up 0.70%
- NZSE 50 - down 0.35%
- Seoul Composite - up 1.71%
In Europe markets are higher this morning:
- CAC 40 - up 2.04%
- DAX - up 2.01%
- FTSE 100 - up 1.95%
- OSE - up 1.66%
Apple (AAPL) finally caught a bid with shares rising $22.58 (4.43%) to close at $532.17/share during Monday's session. Investors finally realized what a buy the shares were as Apple led the tech sector higher. We have been talking about this and stated last week that this past holiday season could very well end up surprising everyone as the traffic at the stores was quite heavy (measured by the lines at checkout, not by how many people were browsing). The shares have been beaten down pretty hard lately, and with the deal last night having been reached we think that Apple will resume being a market leader as capital rotates back into the market.
There are some who still think that Yahoo (YHOO) is a joke and that this latest rally will run out of steam as the company has used smoke and mirrors to get to where they are. First off, we are not in this camp as we think this is a serious reversal of fortunes and secondly, Marissa Meyer is the real deal and is positioning the company for a turnaround. Expect new products, improved products and a much more focused company moving forward. The stock is already hitting new 52-week highs (another one on Monday) and if the advertising market strengthens with the overall economy 2013 could see many more new 52-week highs.
We have had numerous readers send us emails and chats asking us about the situation surrounding General Motors (GM) and Ford (F) which have both seen shares move higher recently. After Monday's session, both stocks were at 52-week highs and this is undoubtedly due to the strong vehicle sales we have seen over the past few months, which continues a long uptick since the lows set in late 2008. Looking at the economic news due out today, at 2:00 PM EST we will get the latest numbers as the manufacturers release their latest sales figures.
Monday was a rough day for many ETFs which track volatility and bearishness in the market, especially those with are double and triple leveraged. We want to focus upon the iPath S&P 500 VIX Short-Term Fund (VXX) which closed at $31.81/share after falling by $3.62 (10.22%) on extremely high volume of 58.8 million shares. We would expect this one to get pummeled again in today's session as the fiscal cliff has been averted and markets across the world are moving higher by 1-2%. This was a crowded trade and now the exits will be crowded as investors rotate out and try to go long the market. In our opinion this will settle down in the $25 range until the next deadline on the debt ceiling approaches (for spending cuts in three months).