As standoff drags on, fragile wisps of hope underpin rally
Stocks are rallying on hopes for a deal on the debt limit, yet keeping the government shut down. Stocks are up on that? A short-term deal to raise the debt limit, keep the government closed, and appoint a joint committee to consider spending cuts? Yes indeed.
House Speaker John Boehner will convene another House Republican conference today, with a likely press conference at 11 AM. Senate Democrats will be going to the White House this afternoon, followed by House Republicans in the late afternoon. All this activity has traders convinced some kind of deal is coming.
The market only cares about acute risks, risks that can happen right now.
Not surprisingly, high beta names that have been beaten up this week, like biotech, Chinese Internet namess, and favorite trading stocks like Facebook and Netflix are all outperforming today. Bank stocks also up.
Ten year yields, at 2.72 percent, are near the highest levels in a month. As a result, it's likely dividend paying stocks like utilities and REITs underperform.
Meantime, others are taking actions to reduce the impact of a possible default. Fidelity Investments, the nation's largest money market mutual fund manager, announced that they have sold all of its short-term U.S. government debt. The Phillipines announced they were taking a "defensive position" to protect itself in case of a U.S. default. Hong Kong raised margin requirements on Treasury bills.
1) earnings news is not so bright as Chevron implied third quarter profit would fall short of forecasts due to lower earnings from their refining division, which will likely affect other major integrated oil companies like Exxon and Royal Dutch.
2) The NYSE announced that they anticipate their merger with ICE will close on November 4th. This is contingent on receiving the final round of approvals from the five national regulators in the countries in which Euronext operates (Portugal, U.K., Belgium, France, Netherlands).
4) A handful of IPOs on deck:
a) Western Refining Logistics (WNRL), a Master Limited Partnership that owns oil pipelines in the southwestern U.S., priced 13.75 million shares - more than the 12.5 million expected - at $22 each, above $19 to $21 range.
b) Antero Resources (AR), an independent shale oil and gas producer priced 35.7 million shares - more than the 30 million expected - at $44 apiece, above $38 to $42 talk.
On the Nasdaq, an oncology biopharmaceutical company, MacroGenics (MGNX) priced five million shares at $16 each, in line with $16 price talk.
—By CNBC's Bob Pisani