On Friday, the Dow closed with a triple-digit gain but gave up most of its gains from earlier in the day, and the S&P closed flat.
The day was marked by the momentous news that House Speaker John Boehner, R.-Ohio, finally accepted the inevitable and relinquished not only the Speakership but also his seat in Congress.
It looks like his successor will be Rep. Kevin McCarthy, R.-Calif., who will inherit what seems to be an untenable circumstance.
One is reminded of changes in Republican leadership such as the one that followed the Eisenhower recession in 1958, the dreaded sixth year of the term, in which Republicans lost 48 House seats and 13 Senate seats, 10 of which were incumbents, and the conservatives deposed former Speaker Joe Martin, the only Republican Speaker from the ‘30s to the ‘90s.
After the 1964 losses the moderates made a comeback with Gerry Ford.
What is notable this time is that the upheaval is taking place between elections. It may reverberate in the Senate where Sen. Ted Cruz, R.-Tex., has called Leader Mitch McConnell, R.-Kent., a liar and has blasted him for working too closely with Minority Leader Harry Reid, D.-Nev.
For his part, McConnell has called Cruz just another obstacle to overcome on the way to getting Senate business done.
Markets wonder how much will get done by the end of the year, especially how the government will be funded and the debt ceiling raised.
Other themes remain whether the Fed will raise interest rates and whether all of this uncertainty will be conducive to the yearend rally Chair Yellen has practically promised.
Carter Braxton Worth credits Fed policy with giving a big boost to tobacco stocks such as Altria (MO) because of the high dividends they pay without being subject to interest-rate shocks. Mike Khouw and Dan Nathan discuss ways options strategies can augment the dividend payout.
Andy Laperriere, of Cornerstone Macro, makes the case that the new House Leadership will be even weaker than the one it is replacing because McCarthy brings little experience to the job.
With somewhat elevated odds that a government shutdown could occur in the next couple months, Max Wolff, of Manhattan Venture Partners, and Phillip Streible, of RJO Futures, discuss the implications with Brian Sullivan, and Streible predicts a temporary pop in the gold price.
CNBC’s Ben White tells Brian Sullivan, “We’ve got a bad December coming up; no way around it.”
Rep. Tim Huelskamp, R.-Kan., complains that Boehner fought conservatives instead of Obama. CNBC’s John Harwood says Republicans need to find a way to project unity for 2016.
Before Boehner’s announcement, CNBC’s Rick Santelli summarized the state of financial markets, blaming the Fed for the volatility and displaying charts he says show that markets are “scripted” by the Fed in the direction of higher bond yields.
His point is that Yellen is heading in the opposite direction from what she indicated only a week ago and holding rates down in order to boost asset prices. One can ask whether this is a sign that the Fed will sponsor a year-end rally.
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