Two Days From Sequester, Stocks Are Calm
Forty eight hours from the sequester, and markets are calm.
House Speaker John Boehner said there are negotiations under way to keep the government funded beyond March, but he clearly wants a broader deal to reform the tax code. The president seems to be sticking to a simple message: cut tax loopholes, along with a few cuts. Politico has an excellent article on why, once again, there are precious little negotiations.
Capital spending is improving. January durable goods ex-transportation (a proxy for capital spending) was up 1.9 percent, much better than the roughly 0.1 percent gain expected. Capital goods orders ex-aircraft were up an even better 6.3 percent. The three-month annualized increase is now nearly 32 percent, according to BTIG.
1) The Italian auction went off well. The country sold the maximum amount of debt (6.5 billion euros, or $8.5 billion) and bidding was strong, with total bids of more than 10.5 billion euros ($13.7 billion). The yield on the 10-year was higher — 4.83 percent — about a half-point higher than previously, but still manageable.
Standard and Poor's yesterday said the elections would not impact the near-term outlook for Italian debt: "Our current base-case expectation is that regardless of the government's composition, the fiscal consolidation will not deviate from the current path, given Italy's high stock of public-sector debt."
2) Apple investor day. I said it yesterday, I will say it again: I'd like to hear less from the value vultures who are trying to figure out how to split up the $137 billion cash hoard, and more about how Apple is going to turn back the tide of competition to the iPad and iPhone.
Right now Apple controls about 35 percent of the tablet market and 17 percent of the smartphone market. Can that be held, or is Apple destined to lose ground?
There's plenty of talk about the problems Apple is having in China. It needs a deal with China Mobile. It has none, supposedly because the subsidy costs for China Mobile are too high. It needs to get more meaningful penetration in emerging market countries. Many analysts have recommended lowering the iPhone price, or producing a cheaper iPhone.
How about a new product launch? Samsung is shipping the Galaxy SIV this spring, supposedly. How about an iPhone mini? OK, call it the iPhone 5s. Whatever. Sell it cheap.
Yes there is talk of an iTV and an iWatch. Worth looking into, but protect the franchise first.
3) Gaming stocks are higher as New Jersey Gov. Chris Christie signed a bill allowing regulated online gambling. Boyd Gaming gains 4.8 percent pre-market, while Zynga is up 3.3 percent. Social gaming companies are also looking to penetrate online gaming.
—By CNBC's Bob Pisani