Monday, December 24, 2012
Trading volumes will be thin in today’s abbreviated session, but they aren’t expected to improve much even on Wednesday when ‘normal’ trading resumes after the Christmas holiday. There is not much on the economic and earnings calendars, but the focus will remain on the unresolved ‘Fiscal Cliff’ question. The Friday sell-off notwithstanding, the market still appears to be holding off for some sort of a deal, though the window for the long-sought ‘grand bargain’ may have closed already.
We will have to wait and see whether we can get any deal done in Congress in the remaining days, but there is not enough pressure on the political leadership from the market’s side. Friday’s sell-off just wasn’t big and panicky enough. In fact, one could even explain it away as mere profit taking ahead of a holiday week. We need a market response along the lines of what it did following the failed TARP vote in Congress a few years ago to focus the leadership’s minds on the issue at hand. But it doesn’t seem like the market is heading in that direction.
In corporate news, shares of Herbalife (HLF) will again remain in the spotlight today, though the beleaguered stock appears on track to recoup some of the losses in today’s session. The multi-line marketer (MLM) of nutritional supplements has been hit hard by the well publicized short bet from hedge fund manager Bill Ackman, who accuses the company of being a ponzi scheme. Herbalife has set an analyst day for January 7 to refute the allegations, but the story has put a spotlight on the entire MLM sector. As a result, shares of other MLM operators like Nu Skin Enterprises (NUS), which is not part of the Ackman short, have also been under pressure.
Sheraz Mian
Director of Research
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