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Has the Catalyst Played Out Already?

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Wednesday, September 11, 2013

Stocks will likely struggle to sustain the positive recent bounce in today’s session given the almost empty economic calendar. The reduced likelihood of an imminent U.S. strike on Syria and positive economic data out of China gave us the market’s recent bounce, but both of these catalysts have likely played out already.

The Syria question is far from resolved as the Russian-led diplomatic proposal will grind through the usual U.N. channels. But at least the prospect of a potentially destabilizing U.S. military involvement in that country’s civil war has receded for now. This has removed some of the safe-haven bid in treasury bonds, prompting yields to move back towards the 3% threshold ahead of next week’s FOMC meeting that is expected to usher in QE Taper. A key unknown at this stage is the impact that Congress’s Syria debate will have on the existing legislative agenda, particularly the coming debt ceiling and budget CR issues.

In corporate news, Apple’s (AAPL - Free Report) new devices appear to have failed to generate the level of excitement typically associated with such events in the past. Many in the market suspect that pricing for the iPhone’s lower priced sibling may not be low enough for emerging markets to help the company gain market share in any meaningful way. In other news, Texas Instruments’ (TXN - Free Report) guidance for Q3 matched expectations and Verizon (VZ - Free Report) is expected to issue a record $49 billion in bonds today to fund its already announced purchase of Vodafone’s (VOD - Free Report) share of Verizon Wireless. The oversubscribed bond deal spotlights the market’s strong appetite for quality corporate bond issuers just days ahead of the Fed’s expected Taper announcement.

Sheraz Mian
Director of Research

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