Dow dropped 382 (session low & below 35K), decliners over advancers 2-1 & NAZ was off 130. The MLP index was off 2+ to the 173s & the REIT index backed off 4+ to 461. Junk bond funds fluctuated & Treasuries had a little selling. Oil fell 1+ to the 65s & gold went up 3 to 1791 (more below).
AMJ (Alerian MLP Index tracking fund)
![Live 24 hours gold chart [Kitco Inc.]](https://www.kitco.com/images/live/gold.gif?0.2180338269244485)
Federal Reserve officials at their Jul gathering made plans to pull back the pace of their monthly bond purchases likely before the end of the year, meeting minutes indicated. However, the summary of the Jul 27-28 FOMC gathering indicated that the central bankers wanted to be clear that the reduction, or tapering, of assets was not a precursor to an imminent rate hike. “Looking ahead, most participants noted that, provided that the economy were to evolve broadly as they anticipated, they judged that it could be appropriate to start reducing the pace of asset purchases this year,” the minutes stated, adding that the economy had reached its goal on inflation & was “close to being satisfied” with the progress of job growth. Committee members stressed the need to “reaffirm the absence of any mechanical link between the timing of tapering and that of an eventual increase in the target range for the federal funds rate.” Markets briefly rebounded after the minutes' release but then turned negative again, with the Dow down more than 120. The FOMC voted at the meeting to keep short-term interest rates anchored near zero while also expressing optimism about the pace of economic growth. In the statement, the committee said the economy had made “progress” toward the dual goals of sustainable inflation around 2% & full & inclusive employment. The statement also noted that the “substantial further progress” benchmark had not been met, but markets took the statement to mean that the FOMC might start rolling back some of its policy accommodation soon. Since then, investors have been parsing Fed officials public statements for clues on when the first step in the tightening process — the reduction, or tapering, of asset purchases — will begin. The minutes were expected to provide more depth on the thinking from individua members. The market now largely expects the committee or Chair Jerome Powell to make an announcement about tapering in the next month or 2, with the process likely to begin before the end of the year. Other areas of focus in the minutes will be the Fed's view on the economy, specifically on the rising inflation pressures over the past several months. Most Fed officials see the highest inflation in decades to be transitory & likely to dissipate once supply chain issues are resolved & demand returns to pre-pandemic levels. While the market is expecting tapering soon, it still doesn't see interest rate hikes coming at least for another year or so. Futures contracts tied to the fed’s benchmark interest rate are pricing in about a 50% chance of a rate hike in Nov & a 69% chance of an increase the next month.
Federal Reserve preparing for taper this year, July minutes show
The US will begin widely distributing Covid-19 booster shots next month as new data shows that vaccine protection wanes over time, top US health officials announced. It's now “very clear” that immunity starts to fall after the initial 2 doses, & with the dominance of the delta variant, “we are starting to see evidence of reduced protection against mild and moderate disease,” according to CDC officials. “Based on our latest assessment, the current protection against severe disease, hospitalization, and death could diminish in the months ahead, especially among those who are at higher risk or were vaccinated during the earlier phases of the vaccination rollout.” As a result, US agencies are preparing to offer booster shots to all eligible Americans beginning the week of Sep 20, starting 8 months after their 2nd dose of Pfizer (PFE) or Moderna's (MRNA) vaccines. While they said recipients of Johnson & Johnson’s (JNJ), a Dow stock & Dividend Aristocrat, single-shot vaccine will likely need boosters, they are awaiting more data in the next few weeks before making a formal recommendation. “With those data in hand, we will keep the public informed with a timely plan for J&J booster shots as well,” the officials said. The plan is subject to a formal recommendation from a CDC vaccine advisory committee & approval from the FDA, also a formality.
U.S. will begin wide distribution of Covid booster shots next month, saying vaccine protection wanes
US homebuilding slowed last month as builders grappled with higher material costs & home prices. Housing starts fell 7% in Jul to a seasonally adjusted annualized
rate of 1.53M, the Commerce Dept said. The forecast was expecting 1.6M starts. The Jun
reading was revised up to 1.65M from 1.64M. Permits
for future construction rose 2.6% to a rate of 1.64M after
Jun's reading was the lowest since Oct. Analysts had anticipated a
reading of 1.61M. Builders have since the reopening of the
economy struggled with supply chain disruptions that have resulted in
materials shortages & higher costs. The cost of strand board,
a common material used in homebuilding, for example, had soared by more
than 500% this year before retreating. Builders
have had difficulty securing lumber at lower prices & the higher cost
has added $36K to the price of building a new home, pricing some
buyers out of the market. A survey released yesterday by the
National Association of Home Builders showed confidence this month fell 5 points to 75, the lowest reading since Jul 2020.
Housing starts unexpectedly fall in July
Gold futures settled lower, then moved up after minutes from the Federal Reserve's late-Jul meeting suggest the central bank's rollback of crisis-era accommodations could begin later this year. Most of the top Fed officials said last month that they thought it would be appropriate to start reducing the pace of its asset purchases this year, according to minutes of their policy meeting. The minutes show, however, that there were sharp divisions on the tapering questions. Several Fed officials said they thought a reduction in the pace of purchases should start next year. Meanwhile, St Louis Fed Pres James Bullard said that the US economy won't be derailed by the spreading delta variant of the coronavirus that causes COVID-19. Bullard said the economy has already made “substantial” progress — the benchmark for tapering the central bank's $120B a month in asset purchases. Dec gold fell $3 to settle at $1784 an ounce following a tiny decline yesterday. Prices for the most-active contract settled yesterday at their highest since early Aug. In electronic trading shortly after the Fed minutes' release, gold futures moved up to trade at $1789 an ounce.
Gold futures settle lower, but move up after Fed minutes
Oil futures posted their lowest settlement since May, with concerns about COVID's impact on energy demand pressuring prices even as gov data revealed a more than 3M-barrel weekly decline in domestic crude inventories. The Energy Information Administration (EIA) reported that US crude inventories fell by 3.2M barrels last week. The forecast called for a decline of 3.1M barrels for crude stocks, while the American Petroleum Institute yesterday reported a 1.2M-barrel decline. West Texas Intermediate crude for Sep fell $1.13 (1.7%) to settle at $65.46 a barrel. Oct Brent crude, the global benchmark, lost 80¢ (1.2%) to $68.23 a barrel. Both WTI & Brent crude marked the lowest front-month contract settlements since May 21. The EIA data also showed crude stocks at the Cushing, Okla, storage hub edged down by 1M barrels for the week, while total domestic petroleum production rose 100K barrels to 11.4M barrels per day.
Oil prices post lowest settlement since May as COVID remains ‘elephant in the room’
Dow Jones Industrials
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