Dow climbed 382, advancers over decliners a modest 5-4 & NAZ went up 73. The MLP index added 1 to the 198s & the REIT index was even at 463. Junk bond funds drifted lower & Treasuries saw more selling. Oil was fractionally advanced 1 to the 82s & gold sank 29 to 1768 (more on both below).
AMJ (Alerian MLP Index tracking fund)
Richmond Federal Reserve Pres Thomas Barkin said he's on board with reducing the amount of economic help the central bank is providing as concerns grow about inflation. With the Fed indicating that it's likely to start pulling back on its monthly bond purchases, Barkin said that seems reasonable, & he's leaning toward beginning the process in Nov. Minutes from the Sep Fed meeting indicated that officials want to start tapering either next month or in Dec. “If we do decide to taper at the next meeting, we’re going to have a discussion on which of those two dates, I’m sure, and my instinct would be if you’re going to decide it, go ahead and move,” he added. “But I’m certainly going to be open to debates on both sides.” Fed officials have indicated they've met their inflation goal of 2%, though the full & inclusive employment part of the mandate remains elusive despite significant progress. Like many of his colleagues, Barkin pointed to temporary factors like supply chain problems that have pushed car prices higher as a major factor in driving inflation, which is running around a 30-year high. But he also conceded that it’s been a bigger problem that he expected. “I do think there’s risk on the inflation side, and I’m watching that very carefully,” he said. The minutes showed that the pace of bond purchases likely will slow by about $15B each month — $10B in Treasurys & $5B in mortgage-backed securities. Fed officials have stressed that even after the start of tapering, it will be some time before interest rate hikes begin. Market pricing currently is for the first increase to come in Jul 2022, with another likely before the end of the year.
An influential Food & Drug Administration advisory committee said the agency should authorize boosters of Johnson & Johnson’s (JNJ), a Dow stock & Dividend Aristocrat, single-shot Covid-19 vaccine to the more than 15M Americans who have already received the initial dose. The
unanimous vote – by the agency's Vaccines & Related Biological
Products Advisory Committee – is a critical step before the US can
begin giving 2nd shots to JNJ recipients, some of whom have said
they are anxious to get the additional protection. One dose of the
vaccine has been shown in studies to be comparatively less effective
than the 2-dose messenger RNA vaccines made by Pfizer (PFE) - BioNTech (BNTX) & Moderna (MRNA). The
panel recommended the boosters to everyone 18 & over who’s already
received JNJ's first shot at least 2 months after the initial
dose. Many committee members said it should be considered a 2-dose
vaccine much like MRNA & PFE's. JNJ stock went up 1.28.
If you would like to learn more about JNJ, click on this link:
Pres Biden signed into law a bill raising the nation's debt limit until early Dec, delaying the prospect of an unprecedented federal default that would cause economic disaster. The House passed the $480B increase in the country's borrowing ceiling after the Senate approved it on a party-line vote last week. The eventual approval came after a protracted standoff with Senate Reps, who derailed initial Dem efforts with filibusters, delays that require 60 votes to halt. Ultimately, a handful of Senate Reps agreed to join Dems & voted to end GOP delays & move to a final vote on the legislation, but Minority Leader Mitch McConnell has said Reps will offer no support for another increase in Dec. Treasury Secretary Janet Yellen had warned that the US would hit its borrowing limit, an unprecedented situation that she & others cautioned could lead to economic catastrophe for a nation still reeling from a global pandemic. Routine gov payments to Social Security beneficiaries, disabled veterans & active-duty military personnel would potentially be delayed, & the economic fallout in the US could ripple thru global markets. The passage of the short-term debt ceiling increase ensures that, for now, the US will continue to meet its obligations. But it sets up another potential cliff at the end of the year — at a time when lawmakers will also be working to pass a federal funding bill to avert a gov shutdown. Reps have said Dems should use a budgetary maneuver to pass an increase in the debt limit without Rep support, like the process Dems are using for Biden's massive climate change & social safety net plan. But Dems have resisted that option. The clash between the 2 parties leaves Congress without a clear solution to avert the next default deadline in Dec, but the White House has emphasized it is still pursuing a bipartisan increase.
A rise in Treasury yields & US stock market put pressure on gold. Gold futures ended lower, as strength in Treasury yields & the US stock market help lead prices to their first loss in 4 sessions, but the precious metal still notched its best weekly advance in 6 weeks. Dec gold fell 1.7% ($29) to settle at $1768 an ounce, after picking a modest gain yesterday & settling at the highest since Sep 14. For the week, gold gained 0.6%, which marked its steepest weekly climb since the week ended Sep 3. Gold's gains over the week have been tenuous, but partly supported by a more subdued $ & some retreat in yields for gov debt even though the Federal Reserve plans to start to wind down its bond buying program now that the economy is recovering from the pandemic. The 10-year Treasury note yield was at around 1.57%, up for the session, but down compared with 1.604% at the end of last week. Meanwhile, the $ was down 0.1% on the week. Weakness in bond yields & the $ for the week have provided a pathway higher for assets, such as gold, which are priced in $s & that don't offer a coupon like govt debt. Gold held at lower levels early today after a report on US retails sales for Sep showed a climb of 0.7% on the month, above forecast. Retail sales, excluding autos & gas prices, increased 0.8% on the month. Separately, a reading of business conditions in the New York area, the Empire State Manufacturing Index fell to 19.8 in October. Gold prices briefly pared some of its losses after preliminary estimate of the index of consumer sentiment by the University of Michigan showed a decline to 71.4 in Oct from 72.8 in Sep..
Oil prices extended their rise to multiyear highs, with US & global benchmark crude scoring an 8th weekly gain in a row — the longest such streak of gains for a front-month Brent contract in over 2 decades. Prices found support from expectations that global power producers will look to use oil, in place of natural gas & coal, amid shortages. Natural-gas futures, meanwhile, gave back yesterday's gain & then some, with prices down by nearly 5% today — pulling prices lower for the week. West Texas Intermediate crude (WTI) for Nov rose 97¢ (1.2%) to settle at $82.28 a barrel, with front-month prices marking their highest finish since 2014. Dec Brent crude, the global benchmark, rose 86¢ (1%) to $84.86 a barrel after hitting a session high above $85. Prices ended the session at their highest since 2018. Brent crude saw a weekly rise of 3%, up an 8th week in a row. That was the longest weekly streak of gains since 1999. WTI, the US benchmark, was up about 3.7% for the week, also up an 8th straight week — the longest weekly winning streak since 2004. Oil prices surged yesterday after the Intl Energy Agency noted a “massive” switch to crude by power generators as natural gas, liquefied natural gas & coal supplies shortages drag on. Prices finished below the session's best levels after US gov data showed a 3rd-straight weekly rise in domestic crude inventories, the biggest since Mar. Data from Baker Hughes suggested that increases in US oil production are ahead, with the number of active US oil drilling rigs up 12 at 445 this week, climbing for a 6th consecutive week.
Investors are feeling good & bidding stocks higher in the early part of earnings season. The Dow rose 550 this week, taking it over 35K & near its high for 2021. More earnings reports will be coming next week along with dreary news from DC.
Dow Jones Industrials