Markets sold off sharply on a more hawkish tone from the Fed

Dow dropped 532 (close to session lows), decliners over advancers 3-1 & NAZ sank 130.  The MLP index fell 4+ to the 195s & the REIT index fell 7 to the 444s.  Junk bond funds remained higher & Treasuries rallied, reducing the yield on the 10 year Treasury down a very big 6 basis points to 1.46%.  Oil continued higher in the 71s & gold was off 4 to 1770 (more on both below).

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Senate Dems are considering a sweeping $6T spending package that could be passed without any Rep support, even as bipartisan talks on Capitol Hill for an infrastructure bill gain momentum.  Sen Bernie Sanders, the chair of the Senate Budget Committee, confirmed that Dems are weighing a $6T reconciliation bill that builds on the dual economic proposals unveiled earlier this year by Pres Biden: The $2.3T American Jobs Plan & the $1.8T American Families Plan.  "The president has given us a framework, I think it’s a comprehensive and serious framework," Sanders said reporters.  "It is the function of the Congress now to take that framework and go with it."  Under an early draft of the plan – which Sanders indicated would include a large expansion of Medicare – about ½ of the proposed spending would be paid for.  Dem efforts to begin moving forward with a party-line bill will start within a few weeks.  "We expect to have a whole lot done in July," Sanders added.  Still, it's unclear whether the measure would receive the necessary support from all 50 Senate Dems.  Moderate members, including Sen Joe Manchin, have indicated they want to pursue a bipartisan infrastructure-only deal & have not committed to using reconciliation to pass more progressive priorities.  "We have to be conscious of the debt," Manchin said, noting that adding $3T to the national debt is "a lot."  An unprecedented level of spending on coronavirus relief efforts pushed the nation's debt to a record $28T.  Senate Majority Leader Chuck Schumer has indicated that Dems are taking a 2-track approach to infrastructure, simultaneously pursuing a bipartisan deal even as he formally triggered the budget reconciliation process this week.

Democrats planning $6T bill sidestepping Republican support

Delta, the highly contagious Covid-19 variant first identified in India, is becoming the dominant strain of the disease worldwide, the World Health Organization's chief scientist said.  That's because of its “significantly increased transmissibility,” Dr Soumya Swaminathan, the WHO's chief scientist, said.  Studies suggest delta is around 60% more transmissible than alpha, the variant first identified in the UK that was more contagious than the original strain that emerged from Wuhan, China, in late 2019.  The situation globally “is so dynamic because of the variants that are circulating,” she added.  The variant has spread to more than 80 countries & it continues to mutate as it spreads across the globe, the WHO said Wed.   It now makes up 10% of all new cases in the US, up from 6% last week, according to the Centers for Disease Control and Prevention (CDC).  CDC Director Dr Rochelle Walensky urged Americans to get vaccinated against Covid, saying she expects delta to become the dominant coronavirus variant in the United States.  “As worrisome as this delta strain is with regard to its hyper transmissibility, our vaccines work,” Walensky said.  If you get vaccinated, “you’ll be protected against this delta variant,” she added.  The UK recently saw the delta variant become the dominant strain there, surpassing alpha, which was first detected in the country last fall.  The delta variant now makes up more than 60% of new cases in the U.K.  Swaminathan saidthat scientists still need more data on the variant, including its impact on the efficacy of Covid vaccines.

WHO says delta is becoming the dominant Covid variant globally

Singapore's gov said it will further ease Covid-related restrictions next week, but at a slower pace than previously announced as local infections have not declined significantly.  The gov started relaxing some measures this week, including increasing the limits on social gatherings & event attendees.  It said that starting Mon, “higher-risk activities” such as dining in & indoor mask-off sports & exercises will be allowed to resume in groups of 2 people — instead of 5 people as previously announced.  Barring another super-spreader event or a big cluster of infections, the gov will allow those activities for groups of up to 5 from mid-Jul.  “The number of cases in the community has somewhat stabilized, but it’s not going down significantly and we’re seeing several unlinked cases every day,” said Gan Kim Yong, Singapore's minister for trade & industry who co-chairs the country's Covid taskforce.  “Therefore we remain concerned, especially when we have yet to achieve a high level of vaccination,” Gan said.  Singapore has to be cautious in resuming activities deemed to be of higher risks due to the more transmissible delta variant first detected in India, Health Minister Ong Ye Kung said at the same briefing.  Ong, who also co-chairs the Covid task force, said a phased reopening will help “buy time to get more people vaccinated, so the imperative now is to boost vaccinations.”

Singapore slows the pace of reopening as Covid cases haven’t declined significantly

Gold futures end with a loss, with prices posting the biggest weekly drop since Mar 2020 as the $ strengthened following a more hawkish tone from the Federal Reserve.  Prices spent part of the day trading higher, but St Louis Federal Reserve President James Bullard said he expects the central bank to raise its benchmark interest rate in 2022.  Gold & other commodities saw prices fall sharply on yesterday, as traders reacted to a Wed Fed meeting that saw policy makers pencil in 2 interest rate increases by the end of 2023 & begin discussing the eventual tapering of its monthly asset purchases.  A surging $ in the wake of the Fed shift is seen as a component of the commodity selloff.  The greenback moved sharply higher Wed & Thurs after the Federal Reserve meeting.  The ICE US Dollar Index, a measure of the currency against a basket of 6 major rivals, was up another 0.3% today, bringing the index's weekly gain to 1.8%.  That's a major gain.  Gold for Aug fell $5 (0.3%) to settle at $1769 an ounce.  Gold saw a weekly loss of 5.9%, its largest since Mar 2020.

Gold futures end lower, suffer biggest weekly drop since March 2020

Oil futures ended higher, with prices recouping much of the losses from a day earlier that were blamed on strength in the $, following a shift in tone by the Federal Reserve this week.  Crude prices tallied a 4th straight week of gains.  Indirect negotiations between the US & Iran to revive the 2015 nuclear deal are ongoing & some analysts have said that a victory by a front-running hard-liner could slow negotiations.  West Texas Intermediate (WTI) crude for Jul rose 60¢ (0.8%) to settle at $71.64 a barrel, lifting the US crude benchmark up 1% for the week, following Thurs's 1.5% loss.  The global benchmark, Aug Brent crude rose 43¢ (0.6%) at $73.51 a barrel & was up 1.1% for the week.  On Wed, WTI crude saw the highest front-month contract settlement since Oct 2018, while Brent ended that session at the highest since Apr 2019, but prices for both contracts fell sharply Thursday.  A surging $ was getting the blame for a selloff across most of commodity markets, including crude oil Thurs.  The greenback moved sharply higher Wed & Thurs after a Federal Reserve meeting that saw policy makers pencil in 2 interest rate increases by the end of 2023 & begin discussing the eventual tapering of its monthly asset purchases.  The ICE U.S. Dollar Index, a measure of the currency against a basket of 6 major rivals, was up 0.4% today & a 1.8% weekly gain, which would be its strongest since Sep.  A stronger $ can weigh on commodities priced in the currency, making them more expensive to users of other currencies.  Baker Hughes data raised the possibility of higher US oil production, as the number of active US oil drilling rigs rose for a 2nd-consecutive week.  Still, officials from OPEC's Economic Commission Board were told this week by industry experts to brace for US output to see a limited rise of 200K barrels per day this year .

Oil prices end higher, up a 4th straight week

This was a tough week for stocks.  The Dow sank about 1200 although NAZ finished near breakeven & in record territory.  There is a lot going on for investors to digest.  While higher interest rates are still down the road, they are are making everybody nervous.  Then the virus shows no sign of giving up its fight, massive gov spending is out there & the big selloff in the commodity market yesterday.  Try to have a restful weekend.

Dow Jones Industrials