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Sequestration Is on the Front Burner, but Is It Already Priced Into the Markets?


And will failure succeed again?

Extra! Extra! Here's a Wall of Worry update as the US government is about to raise a glass to dysfunctional failure once again. Will a last-minute deal happen? Maybe. Will they find a way to delay the spending cuts? Very maybe. Could there be a Hail Mary Simpson-Bowles 2.0 to save the day? Never say never.

While congressional committees pounded on Fed Chair Bernanke for actually trying to do something to keep the good ship America afloat, the Italian Job election mayhem took a breather, allowing the Dow (INDEXDJX:.DJI), S&P 500 (INDEXSP:.INX), and Nasdaq (INDEXNASDAQ:.IXIC) to gain some make-up points.

Back to the latest congressionally-crafted budgetary crisis, we have to wonder if the stock market cares at this point. Is it already priced into stock prices? We will find out right quick. And unless our elected officials start doing something soon, they will find themselves once again wrong quick.

Click on the image below for an interactive version of this week's Wall of Worry, or scroll down for the text-only version.

QE: A mere hint of the party punch bowl being taken away and market guests dash for the door.

US ECONOMY: Sure, I'd love someone on the inside to punch me in the budgetary gut as I'm about to straighten up and fly right!

UNEMPLOYMENT: Spain's overall rate tops 26% and their 16- to 24-year-old demographic tops 55%. Youth may be wasted on the young but in Spain jobs are not.

INVESTOR SENTIMENT: The bears grab the wheel, hoping to jerk the market into the breakdown lane.

HOUSING CRISIS: When the rain and snow stop, we can blow dry and dig out all those "For Sale" signs, and really see how many abodes we can move.

EUROPEAN ECONOMY: Not so bad in the north. Not so good in the south.

CONSUMER SENTIMENT: Can the US consumer hold up to the one-two punch of higher gasoline prices and the end of the payroll tax holiday? February numbers should tell us.

SOVEREIGN DEBT: Panic time in Spain and Italy? "Not again…"

SPAIN: Kind of like one big Florida circa 2009, but without the rest of the United States to prop it up.

VOLATILITY: After a long calm, the current daily 1-2% swings feel like last year's 2-3% moves; kind of getting that cruise-ship-in-a-storm feeling.

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Lloyd: Some nasty market action lately.
HAL: I know. I finally got a restful night's sleep.

CHINA: Latest flash PMI was a bit soft. As all of our heads will be if China doesn't hit the economic gas pedal pretty soon.

ITALIAN ELECTIONS: Holding our breath possibly to be followed by holding our heads in our hands.

GLOBAL ECONOMY: Hey Africa, how about kicking in some GDP so the rest of us can continue wallowing around in confusion?

SPENDING CUTS: I'm hearing the faint howl of Simpson-Bowles 2.0 in the wind...

JAPAN: Definitely top of the currency question market list. And it likely will be for the next few years.

GOLD: Showing signs of life, which in the current environment is interpreted as potential signs of death for equities.

DRAGHI: Sure could use an interest rate cut in the eurozone. Sure not sure they're gonna get it.

EARNINGS SEASON: A few more stragglers left to report.

SEQUESTRATION: Yet another lose-lose situation brought to you by the functionally challenged folks that America elected.

US CONGRESS: This is overflowing from the suggestion box: Early retirement much?

US PRESIDENT: Time to place a call to Monty Hall, the one guy who never failed to get people to make a deal.

THE EURO: Weakening lately. Hey, Spain and Italy, have any idea why that may be?

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What Is Lloyd's Wall of Worry?
by Lloyd Khaner

Welcome to my at-a-glance guide to the issues facing investors this week -- a unique tool for traders and money managers.

Typically the term "wall of worry" refers to the entire body of concerns influencing stock market action. When the wall is high, meaning the market is nervous, stocks tend to get cheaper.

This wall of worry is even more specific. Every week I list the exact concerns in the marketplace and use the list to help me make buying and selling decisions. As I like to say, "Buy fear, sell cheer."

In other words, once the the wall rises above 15 blocks, start looking for deals. If the worry count sinks below 10, consider selling; prices have likely peaked.
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