Markets rise while investors mull over consumer inflation data

Dow continued higher to finish at up 220,  advancers over decliners about 2-1 but NAZ lost 22.  The MLP index added 1+ to the 178s & the REIT index rose 3+ to the 461s.  Junk bond funds did little in trading & Treasuries inched higher in price.  Oil gained 1 to the 69s & gold jumped 21 to 1753 (more on both below).

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Approximately 60% of Americans surveyed by Gallup say they have struggled to get products due to shortages, while roughly 57% have experienced significant delays in receiving a product they ordered.  Overall, the poll found that 7 in 10 Americans have had at least one of these issues, while 46% have had both.  Additionally, about 83% of US adults surveyed have reported noticing "significant price COVID19-related economic disruptions to manufacturing, shipping & labor supply that are expected to continue as the delta variant spreads.”  While Americans in upper-income households earning $90K or more were found to be more likely than lower-income adults to report experiencing significant delays in product shipments, they were just as likely as households in lower income brackets to report being unable to get a product or noticing price increases.  The poll finds that 62% of households earning $90K or more reported they were unable to get products due to a shortage, while 63% said they experienced significant delays in receiving a product.  For households making $36-89K, 62% reported being unable to get a product due to shortages while 55% reported shipping delays.  As for households making less than $36K, 58% reported product unavailability due to shortages while 48% reported shipping delays.  Meanwhile, 82% of households earning $90K or more reported significant price increases in the past 2 months, compared to 83% of households making $36-89K & 81% of households making less than $36K reporting the same.

Majority of consumers feeling supply chain disruptions

After months of wrangling, the Senate just passed a $1T bipartisan infrastructure bill & a budget resolution calling for $3.5T more in spending.  The path ahead will not get any smoother for Dems trying to shepherd Pres Biden's mammoth economic plans thru Congress.  “What we’re doing here is not easy,” Senate Majority Leader Chuck Schumer said.  “Democrats have labored for months to reach this point, and there are many labors to come. But I can say with absolute certainty that it will be worth doing.”  Schumer & House Speaker Nancy Pelosi, have a clear checklist in front of them.  The House has to pass the bipartisan infrastructure bill to send it to Biden for his signature.  Dems' separate plan to expand the social safety net & promote clean energy will require more steps.  The House also needs to pass a budget resolution.  Then congressional committees will take weeks to write a bill that both chambers of Congress can pass using the reconciliation process, which would require votes only from the 50 members of the Senate Dem caucus.  With legislation of this magnitude, the process will likely take months — & could get derailed several times along the way.  To start, Pelosi has said she will not take up the bipartisan infrastructure bill or the final Dem spending package until the Senate passes both of them.  A spokesman for the speaker said that her strategy has not changed after the Senate approved the infrastructure plan and the budget resolution.  Pelosi has faced pressure from some Dems, including those in the bipartisan House Problem Solvers Caucus, to vote separately to pass the infrastructure plan.  She has tied the 2 packages together to keep her whole caucus on board, as centrists grow wary of additional spending & progressives say the bipartisan plan is inadequate.  Reps aim to make the vote as difficult as possible for Dems as they try to win back control of Congress next year.  Dems, meanwhile, want to be able to hit the campaign trail saying they helped to put more money in working families' pockets.  Schumer acknowledged that pushing his party’s priorities thru Congress will be a slog.

Senate passes infrastructure bill and budget framework — here’s what happens next

Dallas Federal Reserve Pres Robert Kaplan said that the central bank should begin to taper its monthly purchases of Treasury bonds & mortgage-backed securities in Oct.  His view that the central bank ought to begin cutting back in 2 months is perhaps the most ambitious from a Fed pres to date.  Other high-ranking Fed officials, including Chair Jerome Powell, have not yet given a forecast for when they want to pull back on the economic stimulus.  “It would be my view that if the economy unfolds between now and our September meeting ... if it unfolds the way I expect, I would be in favor of announcing a plan at the September meeting and beginning tapering in October,” Kaplan said.  But with economic activity and employment now healthier, Kaplan said he feels comfortable pulling back on the stimulus.  “The reason I’m saying we ought to begin the tapering soon is I think these purchases are very well equipped to stimulate demand. But we don’t have a demand problem in the economy,” he added.  “My thought is I’d rather take the foot off the accelerator soon and reduce the RPMs.”  “What I don’t want to do is keeping running at this speed for too long and then we’re going to have to take more aggressive action down the road,” Kaplan said.  He added that the Fed's asset tapering should be separate from its eventual move to raise interest rates.  The process of tapering should take about 8 months, Kaplan said.

Fed should begin asset tapering in October, says Dallas Fed President Kaplan

Gold futures finished sharply higher, marking the first back-to-back advance for the commodity in about a month & the sharpest daily rise in 2 weeks, after investors parsed a reading on US inflation that mostly matched expectations.  Dec gold added $21 (1.2%) to settle at $1753 an ounce, following a 0.3% gain yesterday.  The positive finish marked gold's first consecutive period of gains since a 3-session run ended Jul 15 & the best daily gain for the most-active contract since Jul 29.  Data on consumer prices showed that inflation in Jul remained at up 5.4% for the 2nd straight month, marking a 20-year high, the Labor Dept said.  Meanwhile, the consumer-price index climbed 0.5% on a month-over-month basis last month, but down from 0.9% in Jun & it matched expectations.  The closely watched measure of inflation that omits volatile food & energy—the core price index—rose 0.3%, below expectations for a 0.4% gain, & the 12-month rate decelerated to 4.3% from 4.5%, which was a 29-year high.  The data may have helped to precipitate a move lower in the $ & Treasury yields, which helped to pave the way for a further recovery in bullion.  The 10-year Treasury note yield slipped to 1.32%, compared with around 1.34% yesterday, while the $, as gauged by the ICE U.S. Dollar Index, a measure of the currency against a ½-dozen currencies, was down 0.3%.  Falling yields & a weaker $ can make bullion more attractive to buyers here & abroad.   Meanwhile, Dallas Fed Pres Rob Kaplan said that he will press his colleagues at the central bank to announce a plan to taper bond purchases at its next meeting in late Sep.  Earlier, Kansas City Federal Reserve Pres Esther George also said the time had come to end the central bank’s bond-buying program.  Neither Kaplan & George are currently voting members of the rate-setting FOMC.  However late yesterday Chicago Fed’s Charles Evans argued for waiting longer.  Evans is a voting member of the Fed's policy making committee this year.  Fed officials have persistently said that they see inflation readings in the recovery from COVID-19 as temporary, but a number of policy makers, including Kaplan, have begun to outline a plan to end accommodative policies & eventually lift interest rates which would ripple thru financial markets and impact gold trading.

Gold futures book sharpest rise in 2 weeks

Oil futures erased early losses that came after the White House said it would press the Organization of the Petroleum Exporting Countries & its allies to raise output, turning higher in the wake of data that showed declines in US inventories of crude & gasoline.  West Texas Intermediate crude for Sep ended the day up 96¢ (1.4%) at $69.25 a barrel.  Oct Brent, the global benchmark, rose 81¢ (1.2%) to close at $71.44 a barrel.

Oil prices finish higher as selling sparked by White House blast at OPEC fades

Tomorrow's inflation report will drive the stock market.  It's more important than today's consumer price index.  The former is about the future & the latter is about the past.  At the same time the virus keeps up its fight (which includes the rest of the world) & the spending bills in Congress still have an unclear future.  Ending or reducing the Fed's bond buying program should be a negative for bond prices, giving a boost to yields.  Fed members are taking a more serious look at that program as the economy shows a strong recovery.

Dow Jones Industrials