Say Goodbye To 2012

The market is mixed in early trading.  The market first ticked lower after the open, but quickly found its footing and regained a bid to move higher.  There appears to be some hopes that some sort of "deal" will be cobbled together today, but that remains to be seen. 

Senate Majority Leader Harry Reid said discussions are "progressing", and Congress will remain in session all day.  Senator Corker said that he thinks they'll get something done, but there likely won't be meaningful deficit reduction.  I agree that if anything gets done today, it will just be preliminary and meaningful details will still need to be worked out in January.

Asian markets were mixed overnight.  China led the action with a 1.6% gain after HSBC's final manufacturing PMI reading climbed to a 19-month high of 51.5.  Japan was closed for holiday.

Europe's markets are mixed.  France finished 0.6% higher after the French Supreme Court struck down a proposal for a 75% tax on citizens earnings over 1 million euros.  Germany was closed.

Other than that there isn't much going on today.  Everyone seems to be just sitting around waiting for the next headline out of Washington. What a terrible end to the year for the markets.  Investors don't like when the investment landscape is clouded with political uncertainty.  They would prefer a deal, any deal, so at least the economic impact can be quantified, price levels can adjust, and we can move on and figure out how to make money for our clients.

The 10-year yield is ticking higher to 1.73%.  And the VIX is dropping -8.5% back to 20.78 after a big spike on Friday up to the 23 level. 

Can someone please tell me how the volatility index can be down -8.5% and the inverse VIX etf (VIX) is down 1% and not up??  What a sham.

Trading comment: The market climbed the proverbial wall of worry in 2012.  There was a lot of economic uncertainty, Europe almost came completely unglued, the election provided lots of ups and downs, and a fiscal cliff deal was never struck.  All of that should have made for a pretty bad year for stocks, but the S&P 500 is poised to finish the year +11-12%.  Not too shabby.  And bonds did well also as interest rates continue to fade lower.  I don't think 2013 will see the same benign action.  I expect continued volatility, and think we could see another flare up in Europe as Spain's issues move to the front burner.  We have used the lift in the stock markets since November to continue to pare back equity exposure and get more conservative in our asset allocations.  I still think that is the prudent move heading into 2013.  If we do get a big pullback at some point in the first half of 2013, we would look to put money back to work in equities as that would probably be a good buying opportunity.  We shall see.

A happy, healthy, and prosperous New Year to all our readers!

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Stocks Lower Again As Deal Hopes Fade

The market is lower again in early trading as hopes for a deal to avoid the fiscal cliff fade.  The market did get a pop from its early lows when a headline came across that Obama was going to propose a new plan which would scale back budget plans and renew tax cuts for all but top earners.  But this headline isn't really new, and I suspect the positive reaction will fade.

Although the action has been negative lately as hopes for a deal fade, longer term it might work out better as whatever deal that gets reached will have had more time to hatch vs. a hastily slapped together deal.  We have also not heard anything about the debt ceiling expiring.

In economic news, pending home sales rose 1.7% in November.  Also, the Chicago PMI rose to 51.6 in December from 50.4 the prior month.

Asian markets were higher across the board overnight, led by a 1.2% gain in China.  But European markets are lower amid weak economic data.  French GDP was revised lower to 0.1% in Q3.  Spanish retail sales declined -7.8% yr/yr.  And Italy auctioned off 5- and 10-yr debt, but was only able to place 5.88 billion euros of the 6 billion target.  10-year notes garnered a yield of 4.48%, slightly above the November auction's yield of 4.45%. 

The dollar is up a little today, and most commodities are weak. Oil prices are a bit lower to $90.70, and gold prices are lower near $1656.  Silver and copper prices are lower as well.

The 10-year yield is flat near 1.71%.  And the volatility index (VIX) continues to creep higher, up 3.6% today to 20.18.   These are levels we haven't seen since July.  But at that time the market was starting to move higher. 

Trading comment:  The S&P 500 had a late rally yesterday to recapture its 50-day average.  It would have been a positive if the market could have built on that positive reversal and added to it today.  It's still early, so anything could happen, but so far the market is weak again and the SPX is falling back below that 50-day support.  Volume is also light on this Friday ahead of the New Year's weekend.  Although the market is open on Monday, many traders might just pack it in and take a long 4-day weekend. 

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Stocks Give Back December Gains

The market is lower again in early trading after Senator Harry Reid says it is unlikely they will get something done to avoid the fiscal cliff before year end.  Stocks ticked lower on this headline, despite the President making calls to all 4 key Congressional leaders to try to get updates.

In addition to the fiscal cliff talks, under the radar is the fact that Treasury Sec Geithner said the country's debt limit will again be hit by December 31st.  They sure didn't buy themselves much time last August when they raised the debt ceiling.  Dumb.

In economic news, the latest consumer confidence number for December ticked lower to 65.1 from last month's reading of 71.5.  November new home sales hit 377,000 which was below expectations but higher than the previous month's 361,000.

Asian markets were mostly higher overnight, led again by Japan which continues to talk about more serious stimulus measures.  This time they are even talking about buying foreign assets.  China lagged and finished -0.6% lower.  The S. Korean finance minister cut their growth forecast for 2013 from 4.0% to 3.0%.

Europe's markets are mixed this morning.  Germany's finance minister said the country's economy will expand at a "decent" pace next year.

The dollars is flattish this morning, as our most commodities.  Oil prices are flat near $90.90 and gold prices are near $1660.  Silver and copper prices are getting a little more of a bounce today. 

The 10-year yield is fading back to 1.71%.  And the volatility index is up another +4.5% near the 20.50 level, which it has not seen since July.

Trading comment: The S&P 500 is slipping below its 50-day support right now, which sits near 1412.  The Nasdaq is also below its 50-day today.  The price action today has also erased the December gains in the market, and with 2-days left of trading for 2012 we could see traders look to lock in profits as hopes of avoiding the fiscal cliff fade.  We have continued to counsel a cautious approach.  We realize that even if we miss the 12/31 deadline and a deal is reached soon after, the market would likely rally on the positive news.  But even a deal is likely to contain policies that are not going to stimulate the economy in the near-term and are more likely to dampen economic growth.  As such, we want to remain conservative for the intermediate-term.

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Deal Enthusiam Fading

The market had been running higher into last week on what seemed like optimism that Congress would get something done to avoid the fiscal cliff.  With 3 days left on the calendar in 2012, that optimism is fading into pessimism.  The market opened on a flat note this morning, but has since started to fade into negative territory.

So far, materials stocks are outperforming while consumer discretionary stocks are really lagging.  The early reports for holiday sales don't seem as robust as hoped for.  I heard that McDonald's was even urging franchisees to remain open for Christmas to help boost Q4 sales.

In economic news, the Case-Shiller Home Price Index rose 4.3% in October, a strong showing on top of the previous month's reading of 3.0%.

Asian markets were up across the board overnight.  Japan's new prime minister has promised unlimited money printing to end Japan's bout with deflation.  Japan led the action with a +1.5% gain. 

The dollar is lower vs. the euro and that is boosting commodities.  Gold prices are up only slightly near $1662, but oil prices are back above the $90 level near $90.77.

The 10-year yield is a little lower after last week's spike higher and trading near 1.74%. 

Volatility expectations are picking up with the VIX spiking +8.5% so far up to the 19.35 level.  The VIX has had a hard time maintaining these big spikes into the close.  Let's see if this early spike in volatility fades into the close today.

Trading comment: The Nasdaq 100 has fallen back below its 50-day average support.  And the S&P 500 is only 6 points away from testing its 50-day average.  It still feels to us like the time to be getting more conservative in our asset allocations.  The recent lift in the markets into mid-December may prove to be just a lift that offered investors better price levels to trim equities heading into the near year.  For us to be wrong, the markets would have to shoot higher as we enter 2013.  While anything is possible, we view the odds of such an outcome as relatively low given the headwinds and economic backdrop the market is facing.

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Volatility Spikes On Fiscal Cliff Delay

In case you have been on the moon the last 18 hours, House Speaker Boehner cancelled last night's vote on the "Plan B" idea for the fiscal cliff.  Global markets responded negatively to the news, and last night the Dow futures were down nearly 250 points.  Currently, the market has bounced a bit from the morning lows but the Dow is still down around 170 points as of this post. 

Hard to call this one ahead of the holiday weekend.  Either we see some short covering and the market rallies a bit from here, or folks throw in the towel and take off more risk heading into next week which would likely mean we close at the lows for the day.  Take your pick.

Boehner said he is not walking away from the debate with the President, but there are no more votes before Christmas, and then the window before year-end gets pretty narrow.  Hard to see how the wide gap we are at right now gets closed in that short of a time frame.

We got some more positive economic data this morning in the form of a good durable goods report.  Durable goods rose 0.7%, which was better than expected, but ex-transportation the figure rose +1.6% which is pretty strong.  And personal spending increased +0.3%.

Asian markets were all in the red last night after the Boehner news.  And Europe is lower this morning on the same news as well as some light economic data.

Commodities are mixed with precious metals higher and energy lower.  Gold is up a bit to $1654 while oil is trading lower near $88.37.

The 10-year yield is lower to 1.75%.  And the volatility index (VIX) is spiking 10% this morning up to the 19.40 level.  I've been saying that the market felt a bit complacent lately, so this morning's spike is not all that surprising given the news backdrop.  But the VIX hit levels this morning that it hasn't touched since July.

Trading comment: I am leaning toward this being a one-day plunge and that dip buyers will be back next week trying to squeeze some more profits out of the market into year-end.  I don't think that the market was really pinning its hopes on the "Plan B" anyway, so while last night's no vote is an incremental negative it really seems like just more of the same in the fiscal cliff debate.  I think bulls will come back next week on hopes that Congress and the President cobble something together before year-end.  I plan to nibble on some long trades into the close today. 

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Oracle Buys Eloqua: Expanding Marketing Footprint

Eloqua's Fit in the Oracle Application Portolio

Eloqua is being brought in as the 'centerpiece of the marketing cloud' solution within the broader Customer Experience Cloud offering.  The Customer Experience Cloud is Oracle's comprehensive go-to-market strategy for its CRM offerings that it introduced in mid-2012.  Additionally, Eloqua will be leveraged with integrations to Fusion CRM and ultimately extended into vertical offerings.  There is overlap with the previously acquired Market2Lead product in terms of campaign capabilities but Oracle spokesmen stated that Eloqua would be the primary product and Market2Lead would be integrated to it.

Market Reaction

First and foremost, Oracle is serious about its CRM business.   According to IDC market numbers, Oracle has led the worldwide CRM applications market since its purchase of Siebel, holding 11% of the market in the 2011 shares data.  However, both SAP and Salesforce.com are within two percentage points of that share fueling Oracle's motivation to maintain and increase the distance.  The current battle ground of competition within the CRM applications market is being fought in the marketing automation segment where, as this IDC Data Map shows, the traditional transactional vendors hold much smaller footprints.  

This acquisition immediately brings to mind the question, 'what will Salesforce.com do now?'  Not only was and is Eloqua a key partner of Salesforce's, the company relied on it and similar partners to provide this capability to its customer base.  Salesforce.com's acquisitions in the marketing arena to date have been focused on social marketing capabilities.  While Oracle was explicit in stating that the product, like the other components of its various applications offerings, is capable of being used in a heterogeneous environment, Salesforce.com won't be happy long sharing its customer base  Eloqua today, has a significant number of Salesforce.com customers in its base as well as Microsoft Dynamics CRM.  Marketo may become far more attractive to Salesforce.com as the new year begins.

Conclusion

Overall, the latest acquisition by Oracle signals a commitment to building a fully comprehensive product offering for its CRM business that covers all the major elements of the CRM applications market.  For Oracle the coming year will be one of bringing integrations and proof points to market.  For the other marketing automation vendors with broad marketing capabilities, specifically Adobe, IBM and SAS, there will be more of a trade-off for customer evaluating products between a CRM suite solution and best-of-breed. 

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Quick Take: Morning Look

Markets are roughly flat in early trading.  Yesterday the markets really tailed off at the end of the day and ended on a weak note.  It's interesting that there is usually at least one big down day during the week of options expiration, so maybe yesterday was that day.

I'm a little surprised the market didn't bounce more on some of the positive economic data we got.  That could indicate some more weakness later in the day.  And as we get closer to Friday volume levels should tail off as people leave to take a long holiday weekend.  The market is open for a half day on Monday, but lots of folks will simply take off and get in a 4-5 day weekend.

The final estimate of Q3 GDP came in much higher than expected at 3.1%.  That's pretty solid growth, but of course its a rear view mirror datapoint, and at this point we are really concerned with how 2013 GDP will come in.   Current estimates are for growth of 1.5% - 2.0% depending on how fiscal cliff talks effect spending and taxes.

The Philly Fed survey ticked up to +8.1 for December from a low -10.7 reading last month.  And existing home sales rose to 5.04 million units from 4.76 million the previous month.

Asian markets were mixed overnight, after the Bank of Japan upped its asset purchase program by another 10 trillion Yen.  European markets are also mixed this morning.

The dollar is higher and metals are getting hit hard.  Gold prices are lower by $27 to $1640.  Copper prices are down -2% on the day and silver prices are off by more than 4%.  Lots of selling pressure.

The 10-year yield is hovering near 1.79%.  And the VIX is flat at 17.40.

Trading comment: With more individual stocks showing positive action, its hard to want to fight the tape here.  I am no more confident that a grand bargain is reached regarding the fiscal cliff.  Most congressmen are getting ready to go home for the holiday.  So they will have less than a week to get something done when they get back.  That should make for interesting action in the market.  And I still wouldn't rule out a brief pop on any hastily crafted agreement combined with some can kicking provision to push things into 2013.  But as we enter 2013 we have been moving our asset allocations toward a more conservative posture.

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