Congress returns today to face the sequester deadline, a mere 10 days away. Automatic spending cuts of $85 billion through September 30 are expected to kick in at varying times after March 1, if nothing is done to avert them.
Right now, it is all about jockeying to see who gets the most blame for sequester if it kicks in.
Automatic cuts would impact a wide range of sensitive areas, including education, small business, R&D, healthcare, law enforcement, food safety, public health, administrative services, and the military.. It is hard to imagine that the blame will not be shared and the public response more intense than presently expected if sequester goes forward without alteration.
Washington had better be very careful with this one
So far the stock market is telling us not to sweat it, which suggests a deal before March 1, or mini deals afterward that would minimize the damage. The whole $85 billion in cuts does not take effect immediately, but $1.2 trillion stands to be cut over the next 10 years equally divided between defense and non-defense
Uncertainties related to elections in Italy this weekend could be a negative if they weren’t upstaged b y sequester.
TODAY: While the sequester has the spotlight, the market is marching to a drumbeat driven by investors who are buying stocks because they believe there isn’t much left in the “wall of worry” to climb and stocks are the only investment where they can get a return. Following the bear market bottom in early March 2009, investors withdrew $300 billion from stock funds through 2012. In January, they put $37 billion back in, the most since 2004.
Reportedly, they are switching from bond funds to stock funds. Until there is a better alternative for investing the cycle of investing and re-investing will press forward UNLESS something gets in its way.
Obviously, the prime candidate for that is sequester and a prolonged fight over how to minimize the damage of automatic spending cuts.
Look for a mixed open. The market is poised for a sharp move; today should give us better input which way. I don’t think the Street can ignore the prospect of sequester any longer.
Investor’s first read – an edge before the open
Nasdaq Comp.: 3,192.02
Russell 2000: 923.51
Tuesday, February 19, 2013 (9:13a.m.)
APPLE (AAPL: $460.16)
Sellers returned Friday to press AAPL shares lower in spite of the fact hedge funders George Soros and David Einhorn announced they had recently increased their positions and Piper Jaffray’s Gene Munster messaged clients that AAPL may host a product event in the spring. If AAPL is a screaming buy at these levels, it will attract enough buyers to override the steady selling that punished its stock last week.
It looks like AAPL may have to test important support in the $455 – $457 area. That is where it attracted huge buying February 14 when it surged from $456 to $484 in less than two days.
AAPL is up in pre-market trading following a comment by Barclays analyst, Alan Rifkin indicating it may introduce a mini iPhone for $330. Minor resistance starts at $464, but $473 is the big hurdle.
I do not own, nor am I short Apple’s stock.
FACEBOOK (FB – $28.32) FB’s attempt to cross $29 failed Friday and the stock gave up most of the nice gain it posted at the open. FB’s rally failure last week was a bad sign. The stock must move across $29.50 on heavy volume to reverse its negative pattern. I don’t see that happening today without important news.
I don’t own, nor have I ever owned FB. Generally, I don’t recommend or comment on individual stocks. I started covering FB technically after its IPO because on May 21. I felt at $34 it was very vulnerable in face of all the misunderstanding and hype. I warned of a drop to $24-26, which it did shortly thereafter. Following a rally back into the 30s, FB dropped into the low 20s where on August 2, I forecast a low of $16.88. On September 4, it hit $17.55, its low since its IPO at $38. I’ll continue technical coverage for a while to accommodate readers.
As for Apple, well it is a big-name stock that got shellacked in a short period of time, I wanted to help target a bottom as with FB. Comments are based on technical analysis only.
This will be another light week for economic reports.
But the Street is heartened by favorable economic data on employment, personal income, consumer sentiment, auto sales construction spending, durable goods manufacturing, and housing.
I am going to list the economic reports below but will not include the numbers from the last report, since those numbers are often revised significantly and therefore are potentially misleading.
I strongly urge you to access the website: www.mam.econoday.com for detailed reports on this week’s calendar and an excellent recap (plus graphs) of last week’s reports. The site does a great job graphically illustrating key indicators.
Housing Market Ix.(10:00)
Housing Starts (8:30)
Producer Price Ix.(8:30)
FOMC Minutes (2:00 pm)
Jobless Claims (8:30)
Consumer Price Ix.(8:30)
PMI Mfg. Ix (8:58)
Existing Home Sales (10:00)
Phila. Fed. Svy (10:00)
Leading Indicators (10:00)
“Investor’s first read – an edge before the open”
The writer of Investor’s first read, George Brooks, is not registered as an investment advisor. Ideas expressed herein are the opinions of the writer, are for informational purposes, and are not to serve as the sole basis for any investment decision. Readers are expected to assume full responsibility for conducting their own research pursuant to investment decisions in keeping with their tolerance for risk.