Dow climbed 104, decliners barley ahead of advancers & NAZ inched up 1. The MLP index pulled back 4+ to the 192s & the REIT index rose 1+ to the 453s. Junk bond funds were weak & Treasuries continued higher from strong demand. Oil dropped 1+ to the low 72s & gold went up 9 to 1803 (more on both below).
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 is edging closer to unwinding some of the ultra-easy policy measures put in place during the COVID-19 pandemic in order to keep the US economy afloat amid an unexpectedly large spike in inflation. During the Jun policy-setting meeting, policymakers at the central bank unanimously voted to hold the benchmark federal funds rate at 0%-0.25%, where it has been since Mar 2020 & to keep purchasing $120B in bonds each month, a policy known as "quantitative easing" that's designed to keep credit cheap. In its post-meeting statement, the Fed committed to maintaining support for the economy until "inflation has risen to 2 percent and is on track to moderately exceed 2 percent for some time" & "labor markets have reached levels consistent with the committee's assessment of maximum employment." But policymakers also took an unexpectedly hawkish turn, forecasting 2 interest rate hikes in 2023 as they raised headline inflation expectations to 3.4% for 2021 – a full point higher than the Mar forecast. Still, Fed officials gave no signs they were considering immediately scaling back the aggressive bond-buying program. Chair Jerome Powell told reporters during the post-meeting press conference that officials had started "talking about talking about" tapering. "I expect that we'll be able to say more about timing as we see more data, basically," he said. "There's not a lot more light I can shed on that." He added that the Fed would give markets plenty of advance notice before it begins to withdraw the support that began last year. Traders widely expects the Fed to provide more insight into the timing of tapering when central bankers gather in Aug at their annual retreat in Jackson Hole, Wyoming.
Fed moves closer to tapering asset purchases: Here's what that means
The highly transmissible delta variant is now the dominant coronavirus strain in the US, surpassing the alpha variant, according to Covid-19 modeling data released by the Centers for Disease Control & Prevention (CDC). Delta, the variant that was first found in India & is now in at least 104 countries, represented 51.7% of new Covid cases in the US over the 2 weeks ended Jul 3, according to recently updated estimates by the CDC. Meanwhile, the proportion of new cases caused by alpha, which was first found in the UK, was just 28.7% over the same time period, according to the US agency. In recent weeks, US health officials have warned that delta was on track to become the dominant variant in the US, as its prevalence in the nation doubles about every 2 weeks. On Jun 22, a little over 2 weeks ago, White House chief medical advisor Dr Anthony Fauci said delta made up about 20% of all new cases in the US. The World Health Organization (WHO), which has called delta the “fastest and fittest” variant yet, expects it to become the dominant form of the disease worldwide. Delta is estimated to be about 55% more transmissible than the alpha variant, according to a report by the WHO. Pres Biden yesterday once again pushed for all eligible Americans to get Covid vaccinations, stressing the importance of being protected against delta. Despite the US being on track to hit 160M people fully vaccinated in the coming days, Biden said, Ms remain unvaccinated against Covid, “and because of that, their communities are at risk, their friends are at risk, the people they care about are at risk.” “This is an even bigger concern because of the delta variant,” the pres said.
CDC data shows highly transmissible delta is now dominant Covid variant in U.S.
Gold futures finished higher for a 5th straight session, before the release of minutes from the latest meeting of the US's rate-setting Federal Open Market Committee showed officials pondering the start of a reduction in asset purchases. The gains in bullion were supported by a steady $ & a decline of 10-year Treasury note yields to levels not seen since Feb, helping to bolster appetite for precious metals. Gold's recent bullish trend, which yesterday helped to propel the precious metal toward a golden cross, which occurs when the 50-day moving average crosses above the 200-DMA, has been supported by buying in safe-haven assets & muted moves in $s. Aug gold traded $8 higher to settle at $1802 an ounce, following a 0.6% rise yesterday that pushed the metal to around a 3-week high amid its longest string of gains since a 6-session streak ended May 20. Gold hasn't finished at or above the psychologically significant level in 3 weeks. Trading for bullion comes as yields for the 10-year & 30-year Treasury dipped to their lowest levels since Feb. Lower yields support bullion because it lowers the opportunity cost of owning non-yielding precious metals. Gold settled before minutes from the Fed’s last policy meeting were released. Those minutes, from the rate-setting Federal Open Market Committee’s Jun 15-16 gathering, indicated that officials wanted to eventually taper asset purchases, running at $120B a month, as a “matter of prudent planning.” Several officials advocated for reducing $40B in monthly purchases in mortgage-backed securities & a “various” members of the Fed saw the economy meeting the central bank’s definition of “substantial progress” earlier than anticipated.
Gold futures log 5th straight gain as yields for U.S. benchmark debt skid to February low
Oil futures fell sharply, giving up early gains to end lower as traders monitor a standoff continues between the UAE & fellow OPEC members over a proposed output rise. West Texas Intermediate (WTI) crude for Aug fell $1.17 (1.6%) to close at $72.20 a barrel. Sep Brent crude, the global benchmark, lost $1.10 (1.5%), to settle at $73.43 a barrel. Oil trading has been volatile after talks by the Organization of the Petroleum Exporting Countries & its allies (OPEC+) collapsed on Mon, derailing a proposal to ease existing output curbs in a controlled manner & allow production to rise by 400K barrels a day each month from Aug thru Dec. Crude oil prices initially rallied on expectations that production wouldn't rise even as demand accelerates this year, with WTI hitting a 6½-year high & Brent trading at its highest since 2018. But markets turned down during yesterday's sessions on worries the impasse, which centers on a call by the UAE to raise the baseline that determines its output, could lead producers to open the taps & flood the market with crude. Analysts said crude prices saw renewed pressure on today after an article describing the UAE's desire to boost market share, underlining its rift with Saudi Arabia & the rest of OPEC.
Oil prices end sharply lower as traders await next move in OPEC standoff
Treasuries with very low yields along with gold with no yield are in strong demand by investors. OPEC+ is struggling to agree on production cuts for the rest of the year, largely as a result of a dispute between Saudi Arabia & the UAE. Meanwhile the virus is fighting back hard with new variants. Currently, the Dow, while near record highs, is still about where it was 2 months ago (see below).
Dow Jones Industrials
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