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The Day Ahead: Closed Door Cliff Meetings Ahead of Sunday House Session
Posted to: MBS Commentary
Friday, December 28, 2012 8:20 AM

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After the closing bells on Thursday, the White House announced that the President would be meeting with Majority and Minority Leaders from both the Senate and the House on Friday.  One can only imagine that the goal is to produce actionable legislation that sneaks in before the Fiscal Cliff buzzer sounds early next week.  The fact that the House of Representatives announced earlier on Thursday that it would reconvene on Sunday evening seems to mesh with a few days of strategy and sales pitches including all four corners of congressional representation.  This is the first serious meeting announcement we've seen and would that it were more of a surprise to be seen this late in the game.

This closed-door meeting can inform Friday's session in three ways.  Naturally, any information that makes it to the press either during or after the meeting will be pounced upon wholeheartedly, provided it's not simply lip service.  Any indication that a deal is likely to be reached before 2012 expires will likely take a toll on bond markets and give stocks a boost, though the details would be important.  

The meeting also guides markets in that it suggests relative containment until more information is available.  Additionally, the meeting could offer guidance simply in that way it's interpreted by markets ahead of any substantive information.  After all, we saw how the mere mention of the House coming back on Sunday night took a chunk out of bond prices just before 3pm on Thursday, and all the market had was the assumption that the 11th hour session meant they were expecting to be working on something important.  

It's the same story with Friday's closed-door meeting between Obama and the four Congressional leaders.  The simple fact that all 5 of those people are sitting down in a room together, 2 days ahead of an obviously important reconvening of the House announced mere hours before, is liable to get hopes up that something is happening.  Again, markets probably won't run too far in either direction without at least a tiny nugget that speaks to the meeting's tenor (or Congress's Sunday plans), but in a way, the mere existence of this meeting is guaranteed to be more honest than any of the soundbytes that markets have traded so far.

It's either last ditch, a concerted, coordinated effort, or some mix of the two.  As soon as markets get an inkling that it's something greater than "last ditch," things could start moving quickly.  While there is economic data on the agenda on Friday morning, including Chicago PMI and Pending Home Sales, we'd again lean toward Fiscal Cliff headlines trumping all but the most brutally surprising economic reports.  Even then, it takes only a very moderate Cliff headline to outshine the wildest possible Chicago PMI and Pending Home Sales combination.  Watch and react mode, for those who aren't as locked as they want to be...

MBS Live Econ Calendar:

Week Of Mon, Dec 24 2012 - Fri, Dec 28 2012

Time

Event

Period

Unit

Forecast

Prior

Mon, Dec 24

00:00

No Significant Data, Early Close

--

--

--

--

Mon, Dec 25

00:00

All US Markets Closed

--

--

--

--

Wed, Dec 26

09:00

CaseShiller Home Prices

Oct

%

0.4

0.4

Thu, Dec 27

08:30

Initial Jobless Claims

w/e

k

360

361

10:00

Consumer Confidence

Dec

--

70

73.7

10:00

New home sales-units mm

Nov

ml

.378

.368

Fri, Dec 28

09:45

Chicago PMI

Dec

--

51.0

50.4

10:00

Pending sales change mm

Nov

%

+1.0

+5.2

* mm: monthly | yy: annual | qq: quarterly | "w/e" in "period" column indicates a weekly report

* Q1: First Quarter | Adv: Advance Release | Pre: Preliminary Release | Fin: Final Release

* (n)SA: (non) Seasonally Adjusted

* PMI: "Purchasing Managers Index"




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