No news, is no news–and stocks are little changed this morning. But that doesn’t mean that the political turmoil in the U.S. isn’t front and center in just about everyone’s mind.
European Pressphoto Agency Who’s concerned? Well, let’s see. There’s the IMF, which plans to make the political turmoil in the U.S the focus of its meeting this week. Wall Street types, too, are fretting, as they warn about the ramifications of prioritizing some payments over others. And China and Japan are worried too, as both warn the U.S. to get its act together.
Still, the S&P 500 has ticked down 0.1% to 1,675.50, while the Dow Jones Industrial Average is off 0.1% at 14,920.63.
The Lindsey Group’s Peter Boockvar explains the ramifications of international concern:
Japan joined China in telling the US government that they better be careful with the handling of US debt where both countries hold about $2.5T worth. While both will be fully repaid, we have to wonder how tolerant in the future the two will be with not only holding their existing stock of US Treasuries but what their appetite will be in buying more at their historic pace. At some point QE will end (who knows when now) and the US Treasury will need some big buyers to step in to the fill the breach. My message again to the Fed is that it's all about the flow, not the stock.
And despite the calm today, Marketfield’s Michael Shaoul sees evidence that investors are worried, too. He writes:
Yesterday saw a surge in the VIX index, which gained 2.67 points (15.95%) to close at 19.41, its highest close since June 24th, the date the SPX bottomed at 1560.3 (and closed at 1573.09). Although recent market action has been poor, it does not yet compare to the correction that took place in May and June, and this can be seen in the change to the 20 day historic volatility of the SPX which remains quite muted at 9.62, almost half its level in late June.
Of course as its name suggests historic volatility is backwards looking while the VIX is sensitive to the market’s perception of a future move. Nevertheless we are starting to see something of an “event premium” being built into option prices, much as took place last December at the time of the obsession with the “Fiscal Cliff”…
Still, despite the turmoil, Shaoul believes the next move will be determined by the quality of earnings, rather than “the quality of political leadership in this country.”
Speaking of earnings, Alcoa (AA) is scheduled to release after the close today, getting reporting season underway. Investors don’t appear to be placing big bets on Alcoa, however: Its shares have dropped 0.3% to $7.95.
Shares of Jamba (JMBA) have plunged 19% to $10.87 after the juice maker said same-store sales dropped 3.4%.
McKesson (MCK) has gained 4.3% to $135.27 after the Wall Street Journal reported that it was in talks to buy Celesio.
Arkansas Best (ABFS) has dropped 5.1% to $22.59 as the transportation-services company faces a potential strike.
Cloud Peak Energy (CLD) has gained 3.1% to %15.03 after it was upgraded to Buy from Hold at Stifel.
Novatris (NVS) has dropped 1.2% to $74.48 after it was downgraded to Neutral from Overweight at JP Morgan.
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