Finally, we have some tangibly good news about the debt ceiling debate. In fact, it is the single best piece of news regarding this issue, and it points to an end for this pending economic/market crisis …
Grover Norquist, the founder of Americans for Tax Reform and godfather of a “no tax” pledge that most Republicans in Congress have signed, told the Washington Post editorial board that allowing the Bush tax cuts to expire would not constitute a violation of that promise. Norquist’s stance appeared to be a shift from his previous position and it could be a game-changer in negotiations between the White House and Congress to raise the debt limit before America runs out of money to pay its bills on August 2.
Time is running out, but as these things go, the resolution will come as close to the end as is possible. In this case, “as close to the end as is possible” means the market sending the signal it is time to end the stalemate. Today is not the day, as the market is once again straining to break out of its uncertainty restraints. Perhaps the Norquist statement is today’s catalyst, or, perhaps, it is the news out of Europe that the powers that be (France and Germany) are on board for a “contagion containment” resolution to the Greek debt issue. Frankly, I don’t fully understand the particulars, but it appears the market likes what it heard, and that’s what matters.
The financials are leading the market higher today. Good news from Morgan Stanley, the news out of Europe, and Grover Norquist speaking up are the combined catalyst, but that is irrelevant. What may be more important is that the sector could be closing in on a bottom. However, even if this is true, it may still be a bit early to get in, as it just might be dead money. The headwinds are still blowing and the economic recovery is still sluggish, so waiting a bit more won’t hurt.
On the bad news side, oil is running up again. If it gets too much higher, inflation will become a reason to go risk-off. China’s PMI report shows more slowing and the economic softness in both Europe and the U.S. could change the upward bias of oil, but we will see. Sometimes, supply and demand is not the driver it should be for oil.
The S&P Volatility Index (VIX) is falling to the 17 range. This speaks to a lack of fear in the market; yet gold is showing no sign of retreating, which suggests fear is still prevalent.
As I am writing this, the New York Times website is reporting the President and the Speaker of the House are very close to a deal on the debt ceiling. As I write this, the market is climbing higher on the “news.” Could this be it? Could it be that my suggestion this will go down to the wire is wrong? Oh wait, the White House just released a statement that there is no deal. I repeat, there is no deal …
Okay, so I went to the dramatic to make a point – headlines and rumor can quickly shift market momentum these days.
Trade in the day – Invest in your life …
