Market Musings With CNBC Market Guru Robert Hum
Recap: Dow 82.71 ( 0.64%) at 13034.49, S&P 2.23 ( 0.16%) at 1409.28, Nasdaq -22.99 (-0.77%) at 2973.70
Mixed day: Dow loses triple-digit gain at end of day, but still far outperforms S&P 500 and Nasdaq thanks to nice gains in Travelers, Caterpillar, and Chevron.
Apple's worst day in 4 years pulls down Nasdaq and Tech sector all day; Apple now back in bear market territory (down more than 20% from its recent all-time high).
No Apple, no problem: Dow closes at a 1-month high, even as Nasdaq has worst day in 3 weeks.
Gold extends recent weakness, falls to 1-month low as Goldman Sachs cuts 12-month price outlook to $1,800.
The World On The Street Tonight
Geithner: Ready to Go Over 'Cliff' If Taxes Don't Rise/CNBC – Justin Menza: "Treasury Secretary Timothy Geither told CNBC Wednesday that Republicans are "making a little bit of progress" in "fiscal cliff" talks but said the Obama administration was "absolutely" ready to go over the cliff if the GOP doesn't agree to raise tax rates on the wealthy. "I think they're making a little bit of progress," Geithner said. "They're clearly moving and figuring out how to try to move further."
Republicans say, "No way" to ceding debt limit power/Reuters: "Republican lawmakers took a firm stand on Wednesday against an Obama administration proposal that would make it easier for the president to increase the nation's debt limit, worried it would undercut their leverage to cut government spending. Republicans introduced a non-binding resolution in the House of Representatives that, if approved, would put the chamber on record opposing the plan, and a Senate Republican began circulating a letter to President Barack Obama saying it was critical that Congress' role in setting the limit not change."
High-income Californians may pay nation's highest tax rate/SacBee: "Thanks to passage of Proposition 30 last month, high-income Californians would pay the nation's highest marginal income tax rates -- nearly 52 percent -- if President Barack Obama and Congress fail to make a deal to avoid the so-called "fiscal cliff," according to a new study. Without a fiscal cliff deal to the contrary, the Bush era tax cuts on high-income taxpayers would expire next year and rates would return to their previous levels. Gerald Prante, an economics professor at Lynchburg College in Virginia, and Austin John, a Lynchburg economics student, calculated marginal tax rates -- the highest rates on the highest levels of income -- for all 50 states. They combined state, federal and, where applicable, local income taxes, plus payroll taxes for Social Security and Medicare and included the deductibility of some taxes. Proposition 30 added three percentage points to the marginal state income tax rate for California's highest-income taxpayers, bringing it to 13.3 percent. That action raised California over other high-tax jurisdictions to a marginal rate of 51.9 percent, slightly higher than New York City's level. Hawaii was the only other place with a calculated rate above 50 percent."
Report Bolsters the Case for Large U.S. Natural Gas Exports/Reuters: "Sending surplus U.S. natural gas abroad will benefit the country's economy more than harming it, a highly anticipated U.S. study said on Wednesday, offering the Obama administration a basis for possibly allowing more exports. The government-commissioned report, which examined the impact of liquefied natural gas exports in a variety of circumstances, found exports to be positive for the economy under all conditions considered."
S&P downgrades world's oldest bank to junk status/France 24: "Standard & Poor's on Wednesday cut its credit rating for troubled Italian bank Monte dei Paschi di Siena - the world's oldest surviving lender - to speculative-grade status of BB from BBB-. The ratings agency said it was also placing the bank on negative outlook."
Syria Poised to Use Chemical Weapons: US Officials/NBC News: "The Syrian military is poised tonight to use chemical weapons against their own people -- and all it would take is the final order from Syrian President Assad. As the fighting grows more intense and Syrian rebels close in on Damascus, the Syrian regime has turned increasingly desperate. U.S. officials tell NBC News the Syrian military has now loaded the precursor chemicals for Sarin nerve gas into aerial bombs that could be dropped from dozens of Syrian fighter-bombers. This week, U.S. intelligence detected a flurry of activity at chemical weapons sites, like this one, the Furqlus weapons depot near Homs -- Today while U.S. officials confirm the precursor chemicals are loaded, they must still be mixed together to create deadly Sarin gas."
Will Citi's Massive Layoffs Be Enough?/CNBC – Kayla Tausche & Jesse Bergman: "Following Citigroup's announcement that it would cut 11,000 jobs and restructure its businesses, CFO John Gerspach told analysts and investors the move was a "fairly comprehensive initial foray" into its new strategy. Gerspach fielded questions Wednesday at Goldman Sachs' Financial Services Conference about the progress of the bank's rightsizing and whether this round represented the bulk of what the company was expecting under its new chief executive, Michael Corbat. The phrase is a juxtaposition in and of itself, but an accurate one. While Citigroup has been on a downsizing trend since 2007 (counting this announcement, headcount is down 33 percent from 375,000 employees at peak), it represents the first major, strategic decision by Corbat, who is only 50 days into the job."
Heard on the Street: Corbat's Strong First Inning at Citi/WSJ - David Reilly: "Michael Corbat's opening act, unveiled Wednesday, was an immediate hit with investors. The freshly minted Citigroup chief announced the banking giant will trim businesses, reduce annual expenses by around $1 billion and cut 11,000 jobs. But that had better not turn out to be the whole show. Citi is still in need of reinvention. Even after rising more than 6% Wednesday, the stock trades at 70% of tangible book value. In other words, investors continue to believe Citi is worth more broken up than alive."
Property Gains at Paulson/WSJ – Craig Karmin & Juliet Chung: "John Paulson, the billionaire hedge-fund manager who made a fortune betting on the collapse of U.S. home prices, is sitting on a tidy profit from the real-estate market's rebound. The total value of the properties in Paulson & Co.'s $298.4 million Paulson Real Estate Recovery Fund has roughly doubled on paper since the fund was launched in 2009, an executive said Wednesday at the fund's annual meeting in New York."
: "Deutsche Bank failed to recognize up to $12 billion of paper losses during the financial crisis, helping the bank avoid a government bailout, three former bank employees have alleged in complaints to U.S. regulators. The three complaints, made to regulators including the US Securities and Exchange Commission, claim that Deutsche misvalued a giant position in derivatives structures known as leveraged super senior trades, according to people familiar with the complaints. All three allege that if Deutsche had accounted properly for its positions - worth $130 billion on a notional level - its capital would have fallen to dangerous levels during the financial crisis and it might have required a government bailout to survive. Instead, they allege, the bank's traders - with the knowledge of senior executives - avoided recording "mark-to-market", or paper, losses during the unprecedented turmoil in credit markets in 2007-2009."
In brewing rivalry, Instagram trims ties to Twitter/Reuters - Alexei Oreskovic and Gerry Shih: "Facebook Inc's recently acquired photo-sharing service Instagram removed a key element of its integration with Twitter, signaling a deepening rift between two of the Web's dominant social media companies. Instagram Chief Executive Kevin Systrom said Wednesday his company turned off support for Twitter "cards" in order to drive Twitter users to Instagram's own website. Twitter "cards" are a feature that allows multimedia content like YouTube videos and Instagram photos to be embedded and viewed directly within a Twitter message. The move marked the latest clash between Facebook and Twitter since April, when Facebook, the world's no. 1 social network, outbid Twitter to nab fast-growing Instagram in a cash-and-stock deal valued at the time at $1 billion. The acquisition closed in September for roughly $715 million, reflecting Facebook's recent stock drop."