Gridlock is still in place.  Markets are very wary (and weary) today.  You would think that last Thursday and Friday would have demonstrated to Congress that even a hint of settlement is very welcome news.  But now it is the Democrats turn to flex their muscles and demonstrate their power.  Obviously, that is not what we elected them to do.

The market had a very rough opening this morning with the Dow down over 100 points and the S&P and Nasdaq looking weak.  Yet, the market rebounded a little, cutting some of the losses. Did you hear or read anything over the weekend that made you feel good about anybody solving the budget and debt issues soon?  We have 10 days! 

The Senate has rejected the House bill, and the government will shut down at midnight if the House doesn’t submit a “clean” bill with ObamaCare issues removed.  The current thinking is that is unlikely.  What is more likely is a day or week extension to allow time for more negotiating (as if any has really taken place).  How will the market react?

Today, with no new economic data, the market struggled through its third consecutively negative day of trading after a six-day winning streak.  What’s the difference?  We have traded a dubious, yet serious, problem in Syria for a much more tangible, and perhaps less solvable battle, among Congress.

Monday was yet another up-day for the S&P 500 Index as it reached 1704.95, narrowly missing its all-time high of 1709.67 set in August, but the index closed at 1697.60, up +0.57%. The Dow was also up, +0.77%, but the Nasdaq fell -0.12%

The day’s strength was chiefly attributed to a combination of Larry Summers stepping aside as the likely nominee for the new Fed chief and the signing of the agreement between Russia and the US on a method to require Syria to turn over its chemical weapons to the international control. Summers had been under fierce opposition even from Democrats, after being favored by President Obama.

We’re off to a good start to a new week after last week’s good finish. The domestic markets are up more than 1% midday, based on a possibility of compromise in Syria. Rumors have it that Russia has suggested that Syria place its chemical weapons under international control to avoid missile strikes. Further rumor is that Syria welcomed the proposal.

Too good to be true? Perhaps but does seem like a practical way out of the mess for everyone. At least a possible beginning.

Today’s major indices ended in the black, and we believe the market is more likely to continue to go up than down over the remainder of the year. That said, the market is being buffeted by a number of strong headwinds. 

The Syrian crisis tops the list, with the expected outcome changing almost hourly. Surprises have been frequent. The British decided against involvement. President Obama decided to go to Congress.  Congress is waffling as usual, but Obama is getting a little more support than initially expected.

Today, the tepid market had virtually no new data from corporate earnings or the economy, and slid lower throughout the day, especially near the closing. But the 10-year bond yield hit a two-year high at 2.9% and closed at 2.88%.

The increase in bond rates should have been expected with the Fed minutes due Wednesday. The market hates uncertainty. However, it is very certain that the longer-term rates will go higher. The Fed’s annual conference with economists begins Thursday in Jackson Hole, Wyoming, without Chairman Bernanke’s presence. Very few new “certainties” are likely to come out of the symposium. The bottom line: It is a bad time for bonds but should be a good time for stocks. 

Today was a flat market day with the DJIA and the S&P off a small amount while NASDAQ gained a few points. But it was better than last week when all style/caps ended the week in the red. Large-cap value was down the least, at -0.8%, while small-cap value was down the most, at -1.11%. 

Four stocks that don't ordinarily make the cut for our institutional portfolios piqued my interest in today's market. One had only two analysts reporting estimates; all had dividends, but none were as high as 2%. For these reasons, they were eliminated from consideration for our institutional portfolios. Yet, all are interesting growth companies, reasonably priced, and in multiple sectors.

We finally had another down week, albeit by the slimmest of margins. This next week promises to be the most important week of the month and, in all likelihood, next month as well. We get the ADP employment report, the FOMC meeting announcement, the first look at Q2 GDP, the Chicago PMI, the consumer confidence report, and more.  Undoubtedly, today’s weakness was based on investor apprehension about this week’s news and continued corporate reports.

Last week’s economic reports were mixed, and the style/caps were simply “mixed up.”  Our style/cap scorecard was turned on its head last week with year-long loser Large-Cap Growth up +0.26% to become the week’s leader and the last year leader (and still leader for the year) Small-Cap Value, bringing up the rear for the week at -0.15%.