Markets wavered today after having an excellent year in 2021

Dow fell 59, advancers over decliners about 2-1 & NAZ retreated 96.  The MLP index gained 2+ to the 178s & the REIT index advanced 1 to the 511s.  Junk bond funds crawled higher & Treasuries fluctuated with the yield on the 10 year Treasury holding above 1.5%.  Oil dropped 1+ to the 75s & gold jumped 14 to 1828 (more on both below).

AMJ (Alerian MLP Index tracking fund)

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More than a thousand flights were canceled again on toay as airlines continued to contend with the omicron variant of the coronavirus.  Flight-tracking service FlightAware showed 1222 cancellations & 860 delays within, into, or out of the US.  Airlines have said that omicron was causing staffing issues – even as airlines have been hiring – & cancellations have been ongoing since Dec 24.  Thousands of cancellations were also reported abroad due to the same logistical issues.  Earlier this week, the Centers for Disease Control & Prevention (CDC) shortened the recommended isolation time for people with COVID-19 from 10 days to 5 days.  Individuals who are infected & asymptomatic may now isolate for just 5 days, followed by 5 days of wearing a mask when around other people.  In addition, only people who have received a booster shot of the vaccine are exempted from quarantine after being exposed to COVID-19.  It's a move that White House medical adviser Dr Anthony Fauci said would help people "get back to the workplace."  Although still trailing 2019 numbers, the tally of people flying this holiday season far exceeds last year's total.

US omicron surge causes more flight cancellations, delays

Oil prices slid today but were set to post their biggest annual gains in 12 years, spurred by the global economic recovery from the COVID-19 slump & producer restraint, even as infections surged to record highs around the world.  Brent crude futures fell 3¢ to $79.50 a barrel while US West Texas Intermediate (WTI) crude futures dropped 10¢ to $76.89 a barrel.  Brent will to end the year up 53%, while WTI is heading for a 57% gain, the strongest performance for the 2 benchmark contracts since 2009, when prices soared more than 70%.  Both contracts touched their 2021 peak in Oct with Brent at $86.70 a barrel, the highest since 2018 & WTI at $85.41 a barrel, the loftiest since 2014.  Global oil prices are expected to rise further next year as jet fuel demand catches up.  After rising for several straight days, oil prices stalled today as COVID-19 cases soared to new pandemic highs across the globe, from Australia to the US, stoked by the highly transmissible Omicron coronavirus variant.  US health experts warned Americans to prepare for severe disruptions in coming weeks, with infection rates likely to worsen amid increased holiday travel, New Year celebrations & school reopenings following winter breaks.  With oil hovering near $80, OPEC+ will probably stick to its plan to add 400K barrels per day of supply in Feb when they meet on Jan 4, knowledgeable sources said, as they continue to wind back sharp production cuts implemented in 2020.

Oil heads for biggest annual gains since 2009

Pres Biden & Russian Pres Vladimir Putin spoke by phone as tensions rise over a significant military buildup on the Ukrainian border.  White House press secretary Jen Psaki said Biden urged Putin to de-escalate tensions with Ukraine & that his administration was prepared to “respond decisively” alongside allies & partners if Russia further invades Ukraine.  A senior administration official said that the tone of the conversation was “serious and substantive.”  “Both leaders acknowledged that there were likely to be areas where we could make meaningful progress as well as areas where agreements may be impossible,” the official said, adding that the upcoming Jan 10 security talks will build upon Biden & Putin's discussion.  Ahead of those talks, the senior administration official said that the US & European allies will continue to watch developments in Ukraine.  “We’re going to continue to monitor very closely the movement and build-up of Russian forces on the Ukraine border and prepare ourselves for whatever decision ultimately is made by the Russian president,” the official said.  A Putin aide told reporters that both leaders congratulated each other on the holidays & mutually wished success to the Russian & American people.  The aide described the conversation between Putin & Biden as “frank, informative and specific in nature.”  “Putin outlined in detail the basic principles laid down by Russia in the security proposals & emphasized that we will seek to ensure Russia's security.  In principle, the US president agreed with this point of view,” the Russian source explained.  “Biden clearly stated that the United States does not intend to deploy offensive strike weapons in Ukraine. And Putin noted that this is one of the key points for us,” he added.  The call, the 2nd known discussion between the 2 leaders this month, was scheduled at Putin's request. The Russian pres has previously insisted that despite a massive deployment of thousands of troops along Ukraine's border, Moscow is not preparing for an invasion of its ex-Soviet neighbor.  But Putin has laid out conditions for nonaggression:  He has promised that Russian troops will not attack Ukraine if Kyiv's ongoing bid to join NATO is denied.  Russia has described NATO's eastward expansion as a “red line” that poses security threats to Moscow.

‘A crisis of the Kremlin’s making’: Biden and Putin speak amid tensions over Ukraine

US oil futures settled lower on the eve of 2022, marking the first decline in the past 8 sessions, but the loss belies a stellar year for crude bulls, with the commodity posting the sharpest annual rise since 2009.  West Texas Intermediate (WTI) crude oil for Feb declined $1.78 (2.3%) to end at $75.21 a barrel after gaining 0.6% yesterday.  For the week, oil rose 1.9%, rose 13.7% in Dec & posted a 0.3% rise in the qtr.  For the year, WTI rallied more than 55% to clinch its sharpest annual gain in 12 years.

U.S. oil snaps 7-session streak of gains but logs best yearly rise in over a decade

Gold futures settled sharply higher in 2021's final session, but the precious metal still registered the steepest annual drop since 2015 as investor appetite for the traditional safe-haven asset sagged. The precious metal advanced in the final week, month & qtr of the year but it wasn't sufficient to help avoid closing 2021 in negative territory & registering the sharpest yearly drop, down 3.6%, since the metal ended down over 10% in 2015.  Feb gold traded up $14 (8%) to end at $1828 an ounce, following a 0.5% gain for the metal yesterday. For the week, gold rose 0.9%, posted a 2.9% gain & rose 4% in the final 3 months of the year. 

Gold books sharp gain in 2021’s last day, but logs steepest yearly fall since 2015 as ETF interest wanes

The chart below describes the year for stocks.  Starting the year at high levels, Dow had an impressive 19% rally..  However, much of that came in H1.  Since then the going has been tough, held back by setbacks such as fears over Covid & inflation.  After starting from a depressed level, West Texas Intermediate (US oil) was up 56% .  Gold started from an elevated level & slipped back 3½% in 2021.

Dow Jones Industrials

Markets were little changed as the year closes out

Dow slid back 37, advcancers & decliners were essentialy even & NAZ was off 32.  The MLP index stayed near 176 & the REIT index added 2+ to the 512s for another record.  Junk bond funds did little & Treasuries saw more buying, but the 10 year Treasury yield held above 1.5%.  Oil dropped about 1 to the low 76s & gold went up 9 to 1823.

AMJ (Alerian MLP index tracking fund)

CL=F Crude Oil  76.14    -0.85 -1.1%

GC=F Gold    1,822.60   +8.50 +0.5%

 

 

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The new year could be a pivotal one for tech policy — if Congress can move to act before the 2022 midterm season kicks into high gear.  Proposals to update competition law, establish online privacy rights & protect kids from harm on the internet have broad bipartisan support.  But persisting differences on the best way to craft those laws as well as the presence of many other pressing legislative priorities have so far kept many significant bills from advancing.  With dozens of bills drafted & renewed outrage from lawmakers over the potential harmful impacts of internet platforms, there could just be enough momentum to advance some of the proposals.  And in the meantime, gov agencies are likely to forge ahead with renewed regulations.  There’s a lot going on in antitrust that could come to a head in 2022.  That spans legislation, as well as possible regulations & enforcement actions from the Federal Trade Commission & Dept of Justice Antitrust Division.  A package of tech-focused antitrust bills has already crossed a major hurdle in the House, advancing with bipartisan votes out of the Judiciary committee.  But even then, lawmakers expressed reservations about the bills & companion legislation in the Senate must still clear that initial hurdle.

2022 will be the ‘do or die’ moment for Congress to take action against Big Tech

Treasury yields were little changed, the last day of 2021, as the 10-year held above the 1.5% threshold.  The yield on the benchmark 10-year Treasury note dipped less than a basis point to 1.51% while the yield on the 30-year Treasury bond was marginally lower at 1.919%.  Yields move inversely to prices & 1 basis point is equal to 0.01%.  The 10-year yield started the year at 0.91% & hit a high of 1.776% in Mar.  Treasury yields have moved throughout the year amid concerns about inflation & as the Federal Reserve eases off its pandemic-era easy monetary policy.  The central bank in Jan plans to accelerate the reduction of its monthly bond purchases. The Fed then expects to start raising interest rates after tapering concludes.  Many market strategists expect Treasury yields to creep higher in 2022.

U.S. Treasury yields are little changed in final day of 2021

Congressional Dems will return next year & try to check a few long-floundering items off their to-do list before the 2022 midterms consume DC.  The next few months in the Capitol could shape the economic health of US households for years to come.  The scope of Dems' accomplishments could also play a role in whether they hold control of one or both chambers of Congress for the 2nd half of Pres Biden's term.  The Build Back Better Act weighs the most heavily on Dems' minds.  The $1.75T investment in social & climate programs hit a wall this month when Sen Joe Manchin, said he would oppose it.  “It would be really, really sad as someone who worked really hard on this, if we were not successful,” Senate Budget Committee Chairman Bernie Sanders said after Manchin announced his stance this month.  “But it would be even sadder if the American people said, ‘these people stand for nothing. Not only can’t they get anything done, they don’t believe in anything.’”  Though Senate Majority Leader Chuck Schumer has vowed to bring the bill up for a vote next month, it is all but doomed.  Even so, Dems hope to revive it in some form that could win support from every member of their Senate caucus.  The congressional tasks that hold wide-ranging economic implications do not end with Build Back Better.  The Senate will hold votes on whether to confirm Federal Reserve Chair Jerome Powell & Governor Lael Brainard – Biden's choice for vice chair – to lead the central bank as it tries to tackle an economic recovery & the highest inflation in decades.  Congress will have to pass a gov funding bill by mid-Feb to prevent a gov shutdown that could lead to furloughs of federal workers.  In addition, the Senate & House will work to resolve disagreements on a bill that would pile a qtr of a T $s into research & development to catch up with Chinese investments in technology.

Democrats look to salvage tattered legislative agenda as they face 2022 midterm elections

Traders are keeping busy twiddling their thumbs.  Not much else to do today.  Today's excitement in trading comes from buying gold & Treasuries.

Dow Jones Industrials

 

Markets drift lower as the year closes

Dow declined 90 with selling in the last hour, advancers over decliners about 2-1 & NAZ fell 24.  The MLP index was up fractionally to 176 & the REIT index went up 1+ to 511.  Junk bond funds inched higher & Treasuries were in modest demand.  Oil was a little higher in the 76s & gold rose 10 to 1816 (more on both below).

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The Centers for Disease Control & Prevention (CDC) advised people against going on cruises regardless of their vaccination status after a recent surge in positive Covid cases onboard ships as the highly contagious omicron variant sweeps the world.  The CDC increased its travel warning for cruises to the highest level as the agency is investigating or observing dozens of ships that have had Covid outbreaks.  Cruise ships operating in US waters have reported about 5000 Covid cases to the CDC between Dec 15-29, a major spike compared to the first 2 weeks of the month when 162 cases were reported.  “It is especially important that travelers who are at an increased risk of severe illness from COVID-19 avoid travel on cruise ships, including river cruises, worldwide, regardless of vaccination status,” the CDC added.  The CDC warned that Covid transmits easily between people in close quarters on ships & the chance of catching the virus on a cruise is very high even for people who are vaccinated & have received a booster dose.  Facemasks should also be worn in shared spaces.  Passengers who are not fully vaccinated should self-quarantine for 5 days after travel.  Covid cases in the US have surged to a pandemic high.  The US reported a 7-day average of more than 300K daily new Covid cases as of yesterday, an increase of 82% from last week.  CDC Director Dr. Rochelle Walensky said that omicron is driving the rapid increase in Covid cases.

U.S. CDC says people should ‘avoid cruise travel, regardless of vaccination status’

China's industrial and tech hub of Xian reported more than 100 new cases of COVID-19, taking its tally of locally transmitted infections to the highest in any Chinese city this year.  Xian reported 155 new local cases for Dec 29.  That takes its number of local infections to more than 1100 since the flare-up began on Dec 9 & compelled authorities to put the city of 13M under lockdown.  Despite the low case count compared with clusters in many cities around the world, Xian officials have imposed tough curbs on travel within & out of the city since Dec 23, as Beijing demands each outbreak be contained quickly.  "Xian has reached a live-or-die stage in its fight against the virus," Zhang Fenghu, a city gov official, told a news conference.  Samsung Electronics & Micron Technology (MU), 2 of the world's largest memory-chip makers, have warned that the lockdown could affect their chip manufacturing bases in the area.  Xian is also a major tourism destination, drawing visitors to its collection of terracotta warriors buried with China's first emperor more than 2000 years ago.  Authorities have embarked on multiple rounds of citywide testing to trace transmissions.  A 6th round began today, a day after a 5th round.  Many residents have been barred from leaving their housing compounds unless going out to take COVID-19 tests or attend to essential matters approved by authorities.

Chinese city Xian battles COVID-19 peak for the year

The World Health Organization warned that new coronavirus variants could emerge during the pandemic that render the current vaccines useless.  “As this pandemic drags on, it’s possible that new variants could evade our countermeasures and become fully resistant to current vaccines or past infection, necessitating vaccine adaptations,” WHO Director-General Tedros Adhanom Ghebreyesus said.  Tedros sounded that alarm as Covid cases hit record highs in many nations, including in the US.  The latest surge, coming more than 21 months after WHO first declared Covid a pandemic, is fueled by the spread of the new & highly transmissible omicron variant.  Tedros reiterated his frequent calls for nations to work together to improve global supplies & access to Covid vaccines & other crucial health equipment.  He also slammed the “populism” & “short-term nationalism” of some political leaders that he said has “undermined equity and created the ideal conditions for the emergence of new variants.”  “Misinformation and disinformation, often spread by a small number of people, have been a constant distraction undermining science and trust in lifesaving health tools,” he added & noted that “in the huge waves of cases currently seen in Europe and in many countries around the world, misinformation which has driven vaccine hesitancy is now translating to the unvaccinated disproportionately dying.”  Covid vaccines are still effective at preventing severe disease from omicron, experts say, but they are much less effective at preventing infection from omicron.  Booster shots, on the other hand, significantly increase protection from symptomatic disease caused by omicron.

WHO warns vaccine-resistant Covid variants could emerge as pandemic drags on

Gold futures finished higher, despite firmness in the $ & a rally in stocks as investors became less concerned about the omicron variant of COVID slowing economic growth.  Some slippage in Treasury yields limited the early downward tug for bullion & investors stepped in as the session progressed to support the commodity's advance above a psychologically significant price at $1800.  Feb gold traded $8 higher (0.5%) to settle at $1814 an ounce, after declining 0.3% yesterday.  Many technical investors see gold holding above $1800 as an important level that can signal positive or negative momentum.  The $ index was trading up 0.2% at 96.15, as measured by the ICE Dollar Index & bullion gained as the currency rose & bond yields edged lower, & prices of the debt higher, indicating that investors may be picking up safe-haven assets in the remaining days of 2021, with 2022 expected to present further uncertainty even if the omicron variant proves to be less damaging to the global economy.

Gold ends higher Thursday, as buyers step in as 2021 winds down

US oil futures settled higher as fading concerns about the impact on the economy from the omicron variant of the coronavirus & signs of falling inventories helped to support year-end buying.  Upbeat economic reports also provided support for energy bulls, as the Labor Dept data showed that 198K applied for unemployment benefits last week, leaving new jobless claims around a 52-year low amid the spread of omicron.  Separately, the Chicago Business Barometer (Chicago PMI), rose to 63.1 in Dec up from 61.8 last month, with the report viewed as an early gauge of the Institute for Supply Management's more closely followed report on manufacturing activity next Tues.  West Texas Intermediate crude for Feb traded 43¢ (0.6%) higher to settle at $76.99 a barrel, after the US benchmark rose 0.8% yesterday.  The contract has posted 7 straight gains, marking the longest such advance since the 8-session period ended Feb 10.  Feb Brent crude added 9¢ to finish at $79.32 a barrelafter rising 0.4% to the highest price since Nov 25 for the global benchmark.  Brent has climbed for 4 straight sessions.  Both contracts had pared early, modest losses to pivot higher in the middle of the session.  Energy Information Administration data yesterday showed crude oil inventories fell by 3.6M barrels last week.  Gasoline & distillate inventories also declined, indicating demand remained strong despite record Us COVID-19 cases.  Global oil prices have rebounded by 50-60% in 2021 as fuel demand recovered to near pre-pandemic levels & output management by OPEC for most of the year erased a supply glut.  OPEC+ will meet Jan 4 to decide whether to continue increasing output in Feb & the early speculation is that the organization will stand pat on its plan to raise overall monthly production by 400K per day starting in Jan.

U.S. oil ends near $77, adding to 5-week climb

Once again there was very little excitement in the stock market on low volume.  The war with the virus is getting most of traders' attention.  High inflation & the goings on in DC has been hardly noticed.  Tomorrow the markets will be open for am ordinary day of trading.

Dow Jones Industrials