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US stock market daily report (January 16, 2013, Wednesday)

Contributed by Millennium Traders

Surrounded by children and families of victims of the Newtown, Connecticut elementary-school shooting in which 20 elementary-school children and six adults were shot to death by a young man who then committed suicide, President Barack Obama announced a sweeping effort to tighten U.S. gun-control laws on Wednesday. Obama urged Congress to act swiftly on his proposals. “Every day we wait, that number will keep growing,” the president remarked, calling the situation “an epidemic of violence.” In the month since the Newtown shooting, the President said that 900 people have been killed by gunfire. “If Americans of every background stand up and say enough … then change will come,” Obama said. The President proposed a ban on large ammunition magazines and a requirement for universal background checks for gun buyers. Gun-control advocates said that 40% of gun sales occur without background checks, “That is not safe; that is not smart,” according to the president, who continues to back a ban on assault weapons. Obama signed nearly two dozen executive orders setting out immediate actions the federal government can take to reduce gun violence, including ordering federal agencies to do research on gun use and bolstering mental-health training. A spokesman for House Speaker John Boehner indicated the House would wait for the Senate to pass a bill. Obama called for a grass-roots effort to persuade Congress to support his plan. Rep. Carolyn McCarthy, a Democrat from New York elected to Congress by promising to fight for gun control, said that an outright ban on assault weapons would not pass Congress but, a package of reforms could pass the Senate. In the days leading up to the president’s announcement, gun-control advocates have said that the assault-weapons ban was a low priority and that they would instead push for universal background checks, which has a better chance of passage. Opposition from the National Rifle Association is expected to be intense. The president’s framework is based on recommendations prepared by a task force headed by Vice President Joe Biden.

The U.S. Labor Department said Wednesday that U.S. consumer prices remained flat on a seasonally adjusted basis during December, held in check by muted energy costs. So-called core prices, which exclude volatile food and energy categories, edged up a scant 0.1%.

The Federal Reserve reported on Wednesday that industrial production increased by 0.3% during December, for the second straight month. In November, from the initial estimate of a 1.1% gain, production was revised slightly lower to an increase of 1%. For October, from the prior estimate of a 0.7% decline, production was revised to a drop 0f 0.3%. For Q4, industrial production moved up at a 1% annual rate. Due to unseasonably warm weather, utility production fell sharply in December with output at factories increasing 0.8% following a 1.3% rise in the prior month.

The latest Federal Reserve Beige Book survey, covering conditions though January 4, released Wednesday showed the U.S. economy expanded at a modest, moderate pace across the country in December and early January, as spending and hiring were held down by concerns over fiscal policy. In at least one region, concerns about tax and spending policies impacted housing. Three of the 12 Fed regions reporting a decline in factory activity. A key focus of Fed officials, the labor market was seen as mostly unchanged. Due to fiscal cliff uncertainties, several districts reported delayed hiring, often in defense manufacturing.

On Wednesday, according to the National Association of Home Builders/Wells Fargo Housing Market Index, a gauge of confidence among home builders remained unchanged at a seasonally adjusted level of 47 in January after rising in December to the highest level in more than six years, with respondents encouraged by a recovering housing market, but wary over ongoing fiscal uncertainty. The builder-confidence gauge is up 88% from the same period in the 2011.

The Federal Reserve announced a settlement of $557 million was reached on Wednesday with Goldman Sachs Group Inc. (GS) and Morgan Stanley (MS) over foreclosure abuses stemming from the so-called robo-signing scandal. The two big banks agreed to $232 million in direct cash payments to borrowers, some of which went through foreclosure and other assistance to help mortgage borrowers. The Fed said Goldman and Morgan Stanley were subject to "enforcement actions for deficient practices in mortgage loan servicing and foreclosure processing." The banks agreed to provide an additional $325 million in other assistance to homeowners, such as modifications on their mortgages or cuts to the amount borrowers owe. Four banks, including HSBC (HBC) are still in discussions with federal regulators over foreclosure issues.

The U.S. has had a debt ceiling since 1939 and the government is on track to hit its $16.4 trillion borrowing limit sometime in mid-February or March. A handful of House Democrats said Wednesday that they’ve introduced a bill to repeal the U.S. debt limit, something they say is a Republican tool of “blackmail” to force spending cuts. “The debt ceiling is arbitrary, doesn’t affect the deficit and serves no real function in keeping spending down — and it’s time to abolish it,” said New York Rep. Jerrold Nadler. “Only then will we be certain to pay our bills on time and take away from extremists this tool for political blackmail.” Nadler, known for his support of the $1 trillion coin and five other House Democrats are co-sponsoring the debt-limit-abolishing legislation, formally known as the Full Faith and Credit Act of 2013.