Dow dropped 264 (after buying in the last hour was followed by selling into the close), decliners over advancers about 3-2 & NAZ declined 33. The MLP index rose 1+ to the 209s & the REIT index fell 1+ to 451. Junk bond funds continued weak & Treasuries were heavily sold, raising the yield on the 10 year Treasury 4 basis points to 1.54%. Oil saw selling following early buying, finishing only slightly higher in the 72s, & gold was off 15 to 1840 more on both.
AMJ (Alerian MLP Index tracking fund)
![Live 24 hours gold chart [Kitco Inc.]](https://www.kitco.com/images/live/gold.gif?0.2180338269244485)
The Federal Reserve sharply raised its expectations for inflation this year & brought forward the time frame on when it will next raise interest rates. However, the central bank gave no indication as to when it will begin cutting back on its aggressive bond-buying program, leaving investors to watch for Chair Jerome Powell’s press conference on clues about when tapering will begin. As expected, the policymaking FOMC unanimously left its benchmark short-term borrowing rate anchored near zero. But officials indicated that rate hikes could come as soon as 2023, after saying in Mar that it saw no increases until at least 2024. The dot plot of individual member expectations pointed to 2 hikes in 2023. Though the Fed raised its headline inflation expectation to 3.4%, a full percentage point higher than the Mar projection, the post-meeting statement continued to say that inflation pressures are “transitory.” Officials raised their GDP expectations for this year to 7% from 6.5% previously. The unemployment estimate remained unchanged at 4.5%. The statement tempered some of the language of previous statements since the Covid-19 crisis. The FOMC had said the pandemic was “causing tremendous human and economic hardship across the United States and around the world.” The statement instead noted the progress vaccinations had made against the disease, noting that “indicators of economic activity and employment have strengthened. The sectors most adversely affected by the pandemic remain weak but have shown improvement.” Investors were watching the meeting closely for statements about how Fed officials see an economy undergoing rapid expansion since the depths of the pandemic crisis in 2020. Recent indicators show that in some respects the US is expanding at the fastest rate since World War II. But that growth also has come from inflation & the central bank has faced pressure from various sources to at least start curtailing the at least $120B in bond purchases it is making each month. The post-meeting statement did not address the issue.
Fed holds rates steady, but raises inflation expectations sharply and makes no mention of taper
Senate Majority Leader Chuck Schumer plans to formally trigger the
budget reconciliation process as Dems look to muscle
thru Pres Biden's massive T tax & spending plans using their slimmest-possible majority. Schumer said he is convening a meeting today with all 11
Dem members of the Senate Budget Committee to start putting
together the reconciliation vehicle for Biden's 2-pronged economic
proposals: The $2.3T American Jobs Plan & the $1.8T
American Families Plan. His comments come amid a push by a group of bipartisan lawmakers to reach a compromise infrastructure
deal. A
coalition of 10 senators reached an agreement last week for $579B in new spending that would be funded without any tax hikes,
according to a source. The proposal would spend
$974B over 5 years & $1.2T if continued over 8
years. The senators did not release details of the
plan, but a source said it would remain focused on core infrastructure
projects. Schumer said he wants to bring a scaled-back infrastructure bill –
one that has the support of both political parties – to the floor under
regular order before moving to pass a more extensive spending bill. "Both
are moving forward, the bipartisan track and the track on
reconciliation, and both we hope to get done in July, both the budget
resolution and the bipartisan bill," the New York Dem said. But some Dems want to abandon bipartisan talks & pursue
Biden's spending plans unilaterally. Those 2 measures, unveiled in
Apr, would dramatically expand the gov-funded social safety net & would massive investments in the nation's crumbling roads &
bridges, as well as transit systems, green energy, veterans' hospitals & care for disabled & elderly Americans. "I wouldn't vote for
it," Sen Bernie Sanders said Mon of the bipartisan proposal. "The
bottom line is there are needs facing this country. Now is the time to
address those needs and it has to be paid for in a progressive way given
the fact that we have massive income, wealth inequality in America."
Schumer to begin budget reconciliation process to pass Biden's spending bill
The delta Covid variant, first detected in India, has now spread to more than 80 countries & it continues to mutate as it spreads across the globe, World Health Organization (WHO) officials said. The variant now makes up 10% of all new cases in the US, up from 6% last week. Studies have shown the variant is even more transmissible than other variants. WHO officials said some reports have found that it also causes more severe symptoms, but more research is needed to confirm those conclusions. The WHO is also tracking recent reports of a “delta plus” variant. “What I think this means is that there is an additional mutation that has been identified,” said Maria Van Kerkhove, the WHO’s Covid-19 technical lead. “In some of the delta variants we’ve seen one less mutation or one deletion instead of an additional, so we’re looking at all of it.” The UK recently saw the delta variant become the dominant strain there, surpassing its native alpha variant, which was first detected in the country last fall. The delta variant now makes up more than 60% of new cases in the UK. Dr Anthony Fauci, chief medical advisor to the president, said last week that “we cannot let that happen in the United States,” as he pushed to get more people vaccinated, especially young adults. The Centers for Disease Control & Prevention designated the delta variant as a variant of concern in the US yesterday. The WHO designated the delta variant as a variant of concern in early May. The WHO yesterday also added another Covid mutation, the lambda variant, to its list of variants of interest. The agency is monitoring more than 50 different Covid variants, but not all become enough of a public health threat to make the WHO's formal watchlist. The lambda variant has multiple mutations in the spike protein that could have an impact on its transmissibility, but more studies are needed to fully understand the mutations, Van Kerkhove said.
WHO says delta Covid variant has now spread to 80 countries and it keeps mutating
Gold futures rose to snap a 3-session slump, then moved lower after the the FOMC increased its inflation forecasts for this year & next & signaled higher interest rates in 2023. In a statement after the gold futures settlement, the central bank said it might raise interest rates earlier than it previously expected, with 2 interest rate hikes possible in 2023. Gold for Aug was at $1840 an ounce in electronic trading shortly after the Fed announcement. Prices for the contract had climbed $5 to settle at $1861 an ounce, following price declines in each of the last 3 sessions. Gold futures so far this week are down about 1%. Commodity investors have been eyeing the outlook for inflation, which has shown evidence of surging in the US in the recovery phase from the COVID pandemic. US import prices rose 1.1% in May—& were up 0.9% minus fuel—contributing to an 11.3% in the past 12 months, according to gov data.
Gold prices post first gain in 4 sessions, move lower after Fed update
Oil futures settled with a slight gain, just barely extending their rise to the highest prices in more than 2 years after official gov data showed a more than 7M-barrel weekly decline in crude inventories — the 4rth weekly fall in a row. Prices, however, pared most of their earlier gain after the Federal Reserve said it may raise interest rates earlier than it previously expected, with 2 interest rate increases possible in 2023. The $ strengthened following the policy announcement, weighing on prices for $-denominated oil. West Texas Intermediate crude for Jul rose 3¢ to settle at $72.15 a barrel, with front-month prices eking out their highest finish since Oct 2018. Prices were down at $71.90 in electronic trading about a ½-hour after the settlement. Aug Brent crude, the global benchmark, rose 40¢ (0.5%) at $74.39 a barrel, marking another finish at the highest since Apr 2019. The Energy Information Administration reported that US crude inventories fell by 7.4M barrels last week. The forecast called for a decline of 4.2M barrels for crude stocks, while the American Petroleum Institute yesterday reported an 8.5M-barrel decrease. .
Oil prices settle with a slight gain after supply data and Fed update
Dow Jones Industrials
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