SPX Taunts Historical High
The Standard & Poor's 500 index (SPX) ended the trading session Monday, just
nine points for an all time record high. Intraday high level for the S&P today,
hit 1,556.27. Current record high for S&P stands at 1,565.15, which it reached
on October 9, 2007. CBOE Volatility Index, the VIX, fell 8.2% to 11.56 on the
session, closing at its lowest level since February 2007. Trading volume across
the board was light to say the least which could indicate the rally is hitting
Large-scale underfunding of the pension system for Illinois put the state in
crosshairs of the Securities and Exchange Commission, as reported on Monday.
Illinois is charged by the SEC with misleading municipal-bond investors by
failing to disclose large-scale underfunding of the state’s pension system.
“Time after time, Illinois failed to inform its bond investors about the risk to
its financial condition posed by the structural underfunding of its pension
system,’‘ the SEC’s acting director, George Canellos, said in a statement. An
announcement from the SEC indicates the case with Illinois was settled without
imposing fines or penalties on the state since over the past two years, Illinois
has made strides in improving its pension disclosures. The two-year SEC
investigation into Illinois’s pensions, among the most underfunded in the
nation, is only the second of its kind.
President Barrack Obama, in his weekly speech on Saturday called on Republicans
and Democrats to resolve the sequester gridlock so the U.S. economy can continue
to create jobs. "At a time when our businesses are gaining a little more
traction, the last thing we should do is allow Washington politics to get in the
way,” Obama said. Making the U.S. a magnet for new jobs and ensuring a decent
living should be top priority for lawmakers, said Obama, adding he will continue
to reach out to both parties this week to tackle not only the sequester but,
continue the dialogue on immigration reform and gun violence. The President
urged politicians from both sides of the aisle to compromise on the sequester so
the country can focus on nurturing a “rising, thriving middle class.” “Making
progress on these issues won’t be easy. In the months ahead, there will be more
contentious debate and honest disagreement between principled people who want
what’s best for this country. But I still believe that compromise is possible. I
still believe we can come together to do big things. And I know there are
leaders on the other side who share that belief,” he said.
Conference Board, a New York-based private research group, reported on Monday
that a gauge of employment trends - the employment-trends index is designed to
forecast turning points in employment - increased in February by 1.1% to 111.14
for the fifth month of gains however, large federal-spending cuts making up the
sequester are likely to curb job growth in coming months. "As a result of the
large increase in February, and positive revisions to earlier months, the
employment-trends index is signaling an improving employment environment," said
Gad Levanon, macroeconomic research director at the Conference Board. "However,
even though the labor market has gained in recent months, the looming sequester
is likely to slow the pace of job creation in the near term." The
employment-trends index is made up of eight labor-market indicators, seven of
which made positive contributions during February. The largest positive
contribution came from a measurement of firms with positions that they are
unable to fill right now. The sole negative contribution came from a reading on
consumers who said that jobs are hard to find and lockdown. From the same period
in 2012, index level for February is up 3.2%.
Data released on Saturday from China indicates consumer inflation in February
rose to 3.2% year-on-year, for the highest increase since April 2012. Prices
were likely boosted by the Lunar New Year holiday, which often sees a spike in
prices for food and other goods. After months of relatively subdued inflation,
rising prices may have Chinese policy makers worried. The Chinese government
releases combined data for the first two months of 2013 to avoid distortions
related to the timing of the Lunar New Year holiday. Industrial production saw a
9.9% year-on-year rise in January and February. Retail sales in China were
higher by 12.3% year on year during January and February. Electricity output was
up 3.4% year-on-year in in January and February and fixed-asset investment rose
21.2% year-on-year. Property sales in China have been soaring, with an increase
by 77.6% from levels seen during 2012 and highlighting difficulties in keeping
the economy growing at a steady pace while avoiding steep rises in prices. An
uptick in inflation has policy makers in China stirred just as industrial output
and retail sales seem to be softening. Chen Deming, Chinese Ministry of
Commerce, raised concerns about competitive currency depreciation and the
effects of excessive money-printing by central banks. Deming directed comments
to Japan with comments such as, “treating their neighbors as your garbage bin
and starting a currency war.” Beijing has a keen interest in any greenback
debasement with a large part of China’s $3 trillion foreign reserves held in
U.S. dollars. Japan’s quest to raise inflation will worry Beijing if it also
succeeds in chasing up prices in China with the yen falling close to 18% against
the dollar, since mid-November 2012. While China officially operates a closed
capital account, it is also the world’s largest trading nation, so keeping its
borders sealed to money flows will inevitably be a challenge. China risks losing
control of its own monetary policy with a fixed exchange rate and porous capital
controls. Last week, China’s central bank reported companies and individuals had
changed 684 billion Yuan ($109 billion) worth of foreign currency in January - a
record for a single month. If China were to hike interest rates to curb
inflation, the risk is this will only attract more capital as the interest
differential with the yen or dollar widens. An option for China -
internationalize the Yuan although, that goes against its reform agenda to seal
its capital account.
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