Stocks rallied nicely yesterday, and so far today have been adding to those gains. It seems a bit odd that Congressmen keep coming on TV to say that they are still a ways apart on the fiscal cliff stuff but the market continues to rally as if an agreement is imminent.
I think there are two things to keep in mind. One is the potential for a 'buy the rumor, sell the news' type of event where the market rallies in anticipation but if a deal gets announced the market sells off. The other is that not all agreements are created equal. And if one is hastily reached that doesn't bode well for the economy longer-term, than any enthusiasm over a deal could be short-lived once reality sets in. So careful what you wish for.
In economic news, the NAHB Housing Market Index for December rose to 47 from the prior month's reading of 45.
Shares of AAPL tried to bottom yesterday and are up again today. A judge has rejected its injunction bid vs. Samsung, and Samsung will drop its lawsuits against AAPL in Europe. Barron's also had a positive article on AAPL today.
Overnight Asian markets were mostly higher, led by a 1.0% pop in Japan to an 8-month high. The Reserve Bank of India opted to hold its key interest rate steady at 8.00%. In China, the govt. reportedly stated its GDP target for 2013 will be 7.5%.
The dollar is lower today, but commodities are mixed. Gold prices are slightly weaker down to $1693. Oil prices are higher near $87.88. Silver and copper prices are weaker as well.
The 10-year yield is rallying on fears about no fiscal cliff deal. The yield reached 1.80% this morning, which is the highest level since late October.
As for the volatility index, it had a delayed reaction yesterday and really didn't start to decline until late in the day. But today the VIX is dropping by a lot, down 5% so far near the 15.50 level.
Trading comment: I have said recently that we didn't want to fight the tape as it was likely the market would work its way higher as investors anticipated a deal on the fiscal cliff and as portfolio managers looked to put money to work to try to add some performance before year-end. But big picture we have still been getting more conservative in our asset allocations as we feel that there is still some downside risk as we enter 2013.
KAM Advisors has long positions in AAPL