Markets retreat on confusion over government funding

Dow finished down 546 at session lows, decliners over advancers about 3-2 & NAZ lost 63.  The MLP index was steady in the 183s & the REIT index dropped 5+ to the 445s.  Junk bond funds were mixed & Treasuries saw a little buying.  Oil was flattish in the high 74s but higher for the month & qtr & gold rebounded a huge 35 to 1758 (more on both below).

AMJ (Alerian MLP Index tracking fund)

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The Senate approved a bill to fund the gov thru Dec 3 & avert a gov shutdown for now.  It's one of several political issues being followed closely by the markets, which have fallen today amid uncertainty about the passage of a bipartisan infrastructure bill & Pres Biden's $3.5T spending package.  65 senators voted in favor of the short-term funding bill, which did not include a provision to raise the debt ceiling.  35 no votes were not enough to sink the bill, which needed 60 votes to pass.  Treasury Secretary Janet Yellen has said that the US could run out of money to pay its bills by Oct 18 if the debt limit is not raised.  "This vote says we are keeping the government open," said Senate Majority Leader Chuck Schumer ahead of the vote, calling it a "glimmer of hope."  Now the bill heads to the House, which has until midnight to send it to Biden's desk before the close of the federal gov's fiscal year.

Senate approves short-term funding bill to keep government open, House to act

House Speaker Nancy Pelosi said the House was still on track to hold a vote on a bipartisan infrastructure bill today, even as members of her own Dem caucus said she did not yet have the support of enough progressives to pass the bill.  “We’re on a path to have something, that I can say to my colleagues with integrity and certainty is the path we’re on” Pelosi said.  But she added, “And in terms of timing and the rest, I wish we had more time.”  Pelosi & Pres Biden have tried to win support for the infrastructure bill among progressives, who say they will not vote for it unless the House is also ready to pass a sweeping budget reconciliation bill to expand the social safety net & climate policy.  But fundamental parts of that bill are still being debated in the Senate.  House progressives are worried that if they vote to pass an infrastructure bill championed by moderates, they will lose any leverage they have in pushing these same moderates to back a transformative budget bill later on.  Progressives insist that any budget reconciliation bill be at least $3T & include provisions like free pre-school & community college, child care subsidies & an expansion of Medicare to cover dental, vision & hearing care.  But a few hours ago, centrist Dem Sen Joe Manchin released a signed agreement he reached with Senate Majority Leader Chuck Schumer, more than 2 months ago, in Jul, that spells out what Manchin would support in a budget bill.  The maximum topline spending that Manchin would vote for is $1.5T.  This leaves both House & Senate progressives & Manchin far apart.  Even some of Pelosi's closest allies in House leadership are pessimistic about the bipartisan infrastructure bill's chances.  While Pelosi was speaking to reporters in the Capitol, another journalist asked Majority Leader Steny Hoyer, her deputy, what he thought the odds were of passage.  “Are you confident it will pass?”  “Nope,” Hoyer replied.

High stakes House infrastructure vote still on schedule for Thursday, Pelosi says

The co-founder & chief medical officer of BioNTech (BNTX), the German firm which developed a Covid-19 vaccine alongside Pfizer (PFE) said that the world “should not live in fear” of the virus.  “Covid will become manageable. It already has started to become manageable” Dr Ozlem Tureci said.  However, she added that we will “need to go back to a new normality, because this virus will accompany us for, still, some years.”  Asked about concerns over new coronavirus variants, she said BNTX “continuously assess those upcoming variants, and there will be more.”  “For all these variants which are currently circulating, it seems that boosters alone, bringing the waning immune responses back to high levels, are suitable and do protect,” she added.  “However, we have to continue to screen because there might be variants upcoming for which this is not the case. And for this we have a second pillar, namely that we prepare ourselves to be quick and fast in the case that we need to adapt to a variant ... And we are doing those dry runs, not alone, together with regulators, so that they are also prepared for the potential need to switch,” Tureci continued.

BioNTech co-founder says the virus will be with us for years

Centers for Disease Control & Prevention Director Dr Rochelle Walensky said that Covid-19 deaths among pregnant women reached a record high of 21 in Aug, urging expectant mothers to get vaccinated against the virus.  Just 31% of pregnant women nationwide are vaccinated, even though pregnant women with Covid are likelier to experience dangerous symptoms that jeopardize their infants' health, she said.  Her comments came just a day after the CDC announced a health advisory for pregnant women to get vaccinated to reduce the risk of contracting a severe case of Covid.  “Compared with pregnant women without Covid, pregnant women with Covid are more likely to have a preterm birth or a stillbirth,” Walensky said.  “And this very much demonstrates with a huge amount of evidence that pregnant women are at high risk of Covid-19, and their babies are at high risk as well.”  More than 120K pregnant women in the US have been diagnosed with Covid & Walensky added that more than 5K pregnant women have participated in the agency's vaccine safety monitoring programs.  Roughly ½ of those studied received the Pfizer (PFE) vaccine, about 44% got Moderna's (MRNA) & approximately 5% were immunized by Johnson & Johnson (JNJ), a Dow stock & Dividend Aristocrat,.  Walensky said that studying the participants enabled the CDC to determine that Covid vaccines have no impact on increasing the potential for miscarriage.  CDC officials expanded on those findings at a Sep 22 meeting of the agency's vaccine advisory committee, reporting a 12.8% risk of miscarriage by the 20^th week of gestation among 2456 pregnant individuals inoculated with PFE or MRNA.  The risk of miscarriage measured in the study aligns with the normal risk of miscarriage after adjusting for the mom's age, officials said.  But unvaccinated pregnant women are more than twice as likely than non-pregnant women to need intensive care & a ventilator when they contract Covid, Walensky added.

CDC director says U.S. Covid deaths among pregnant women peaked in August

Gold futures climbed, but settled lower for the month, as well as the qtr.  Gold rose today following recent declines fueled by investors' need to cover margin calls due to the potential Chinese real estate crash, linked to property giant Evergrande.  Bargain hunters are picking up gold as a safe haven as smart investors are concerned about a Chinese real estate crash & slowdown, & if that toxic debt can spread virally.  Dec gold rose $34 (2%) to settle at $1757 an ounce.  Based on the most-active contract, prices saw losses of about 3.4% for the month & 0.8% for the qtr,

Gold futures end higher, but post losses for the month and quarter

Oil futures finished higher, finding support from expectations for higher oil demand after a report that China ordered state-owned energy companies to secure winter supplies at all costs.  OPEC+ will hold a meeting Mon to decide on future production levels.  The group is considering adding more oil to the global market, behind the production boost it previously agreed to.  West Texas Intermediate crude for Nov rose 20¢ to settle at $75.03 a barrel.  Prices, based on the front-month contracts, gained 9.5% for the month & ended 2.1% higher for the qtr.

Oil futures finish higher, contributing to gains for the month and quarter

This was a day in the stock market that resembled the wild, wild west.  The Dow was in the red all day.  For the month it fell 1500 & was down 660 in Q3.  Another way to look at the performance, it has been going nowhere for about 6 months.  With all the confusion in DC, that can be expected to continue.  Increased selling the last 30 mins suggests all is not going well in DC.

Dow Jones Industrials

Markets are running into selling while government funding is unclear

Dow dropped 182, decliners slightly over advancers & NAZ went up 40.  The MLP index was off 1 to 182 & the REIT index fell 1+ to the 449s.  Junk bond funds did little & Treasuries edged higher.  Oil fell 1 to 74 & gold surged 31 to 1754.

AMJ (Alerian MLP index tracking fund)

GC=F

Gold

1,743.80

+20.90

+1.21%

 

 

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As Dems forge ahead with unilateral negotiations on Pres Biden's $3.5T spending package, Reps – & at least 1 Dem moderate – caution the expansive slate of social programs included in the bill could have lasting negative consequences for American workers.  The $3.5T spending bill includes many social initiatives championed by progressives, including an extension of monthly child tax credit payments, universal pre-K, free college tuition, paid family leave & expanded child care.  Biden & progressive backers say the slate will create a more inclusive economy that will provide new opportunities for low- & middle-income families.  Under the plan, a grant program would make free community college available regardless of people's "basis of citizenship, alienage, or immigration status."  Medicare would add dental, hearing & vision benefits to its coverage, &, the gov would shell out some $200B to establish universal pre-kindergarten for kids 3 & 4 years of age.  But critics say Biden's social spending programs will effectively create a "welfare state" that will hurt the ongoing US economic recovery & expand the gov's influence over workers.  Sen Susan Collins made the case during a floor speech earlier this week, arguing Biden's "expensive entitlement programs" will "break the connection between work and a brighter future."  "We will not build a more prosperous, just and equitable society characterized by opportunity, dignity and meaning just by issuing government checks," Collins added.  "The time-tested way to achieve those goals for American families is by supporting and rewarding work. It is by recognizing the dignity of work."

Dem joins Republicans warning Biden's govt assistance program will backfire

More Americans filed for first-time jobless benefits last week despite a decline in new COVID-19 cases & the impact of Hurricane Ida subsiding.  The number of Americans filing for first-time unemployment benefits rose by 11K to 362K last week, according to the Labor Dept.  The forecast expected the number of first-time filings to decline to 335K.  Continuing claims slid to 2.802M from a downwardly revised 2.845M in the week prior.  The forecast was for a decline to 2.8M.  The decrease in continuing claims came 2 weeks after the expiration of $300 per week in supplemental unemployment benefits.  About 5M Americans received some form of unemployment assistance, a drop of more than 6M from the prior week.  More than 27.2M Americans filed for benefits during the comparable week in 2020.

Initial jobless claims rise unexpectedly

Congress will race to prevent a gov shutdown today with hours to go before a midnight deadline.  The Senate plans to move first to pass a short-term appropriations bill that would keep the gov running thru Dec 3.  Barring delays, the House would then approve the plan & send it to Pres Biden before funding lapses.  The legislation includes money for hurricane relief & the resettlement of Afghan refugees.  It appears set to pass with bipartisan support, as both Senate Majority Leader Chuck Schumer & Minority Leader Mitch McConnell spoke in support of it earlier today.  “I’m confident the House will approve this measure later this afternoon and send it to the president’s desk before funding runs out,” Schumer said.  “This is a good outcome, one I’m happy we are getting done.”  A gov shutdown could lead to furloughs of federal workers & the suspension of certain services.  A funding lapse could pose particular challenges during US efforts to fight the coronavirus pandemic — though the Biden administration has said a shutdown would have little effect on public health functions.  Congress can snuff out one possible crisis today but has another looming.  Lawmakers still need to raise or suspend the debt ceiling before Oct 18 to prevent a default on US debt that would result in job losses, economic damage & a drop in the stock market.  Dems, who control both chambers of Congress, tried to fund the gov & suspend the debt ceiling as part of the same bill.  Senate Reps blocked the legislation, even though extending the ceiling doesn’t mean new spending.  Approval would authorize the Treasury to cover its existing obligations.  Senate Minority Leader Mitch McConnell has said his party will vote for a funding bill without a suspension of the debt ceiling.

Congress moves to prevent a government shutdown with deadline hours away

A simple measure to fund the gov for the next 12 months remains uncertain & the critical deadline is midnight tonight.  That's because those guys in DC are too busy arguing about how much money can be slopped around (& they are talking about record amounts of money).  Then there is raising the debt ceiling but there are 18 days remaining (maybe less) for approval.  If those guys were better behaved, they would recognize that reckless, partisan behavior makes them look like goofballs to the rest of the world.  They don't know & don't care.  Meanwhile the recovering economy is stumbling & that should continue into Q4 which begins tomorrow.

Dow Jones Industrials

 

Markets bounce back but Treasury yields remain close to recent highs

Dow went up 90, advancers over decliners better than 3-2 & NAZ lost 34.  The MLP index crawled higher to the 183s & the REIT index rose 2+ to the 451s.  Junk bond funds fluctuated & Treasuries were only slightly lower after their recent run.  Oil slid back to the 74s on profit taking & gold dropped 12 to 1725.

AMJ (Alerian MLP Index tracking fund)

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Federal Reserve Chair Jerome Powell still expects inflation to ease eventually, but said that he sees the current pressures running into 2022.  Assessing the current economic situation, the Fed chief said during a panel discussion hosted by the ECB that he was “frustrated” that getting people vaccinated & arresting the spread of the Covid delta variant “remains the most important economic policy that we have.”  “It’s also frustrating to see the bottlenecks and supply chain problems not getting better — in fact at the margins apparently getting a little bit worse,” he added.  “We see that continuing into next year probably, and holding up inflation longer than we had thought.”  Inflation by the Fed's preferred measure is running at its hottest pace in about 30 years. Powell & most of his colleagues say they expect the current pressures to decline back to trend as supply chain bottlenecks ease & demand goes back to pre-pandemic levels.  He added that 2022 should be “quite a strong year” for economic growth.  However, officials as of late have acknowledged that the current inflation conditions have not eased the way the Fed thought they would.  The FOMC last week collectively raised its projection for 2021 core inflation to 3.7% from the 3% forecast in Jun.  “The current inflation spike is really a consequence of supply constraints meeting very strong demand, and that is all associated with the reopening of the economy, which is a process that will have a beginning, a middle and an end,” Powell said.  “We see those things resolving,” he added. “It’s very difficult to say how big those effects will be in the meantime or how long they will last.”  Powell's continued expectations that inflation is temporary were echoed by ECB Pres Christine Lagarde, who sat on the panel with Powell, Bank of England Governor Andrew Bailey & Bank of Japan Governor Haruhiko Kuroda.  “We monitor very carefully, but we certainly have no reason to believe that these price increases we are seeing now will not be largely transitory going forward,” Lagarde said.

Fed Chair Powell calls inflation ‘frustrating’ and sees it running into next year                       

Walmart (WMT), a Dow stock & Dividend Aristocrat, is planning to hiret 150K new US store workers, most of them permanent & full-time, in preparation for the busy holiday season.  The retailer also said it would offer extra hours to many of its store workers.  Retailers have been offering pay raises & other incentives to retain staff to ensure they have enough workers during the holiday shopping season, which starts a day after Thanksgiving & continues into early Jan.  The company has implemented 3 wage increases this year, with its US average hourly wage now at $16.40.  It also offers other benefits such as no-cost college tuition, similar to many of its rivals.  The stock lost 9¢.
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Dr. Gottlieb: Pfizer Covid vaccine approval for young kids by Halloween possible

Dr Scott Gottlieb said it is still possible the Food & Drug Administration (FDA) will approve Pfizer & BioNTwxh's (BNTX) Covid-19 vaccine for young kids by Halloween.  “I wouldn’t foreclose the possibility that this could be out in October,” said Gottlieb.  PFE submitted initial Covid vaccine trial data for kids ages 5-11 to the FDA yesterday, & the company should file a formal application needed for emergency use authorization “shortly,” Gottlieb said.  The FDA has a lot of experience with the PFE vaccine, Gottlieb noted, adding the Covid shot for young kids is the same 2-dose regimen as adults but is administered in smaller quantities.  The agency has already cleared the shots for Americans age 12 & up.  “They’ve seen a lot of clinical data,” he added.  “I’ve long said October is a possibility but it is an optimistic possibility. If it slips, it could slip to mid-November.”

Dr. Gottlieb: Pfizer Covid vaccine approval for young kids by Halloween possible

Gold futures declined for a 2nd session in a row, with a climb in the $ index to its highest levels in a year sending prices for the precious metal to their lowest finish since late Mar.  Dec gold lost $14 (0.8%) to settle at $1722 an ounce, following a 0.8% decline yesterday.  Prices marked the lowest most-active contract settlement since Mar 31.  The popular ICE U.S. Dollar Index was up 0.6% for the day, & the index is up 1.1% so far this week & 2.1% over the past qtr, pressuring prices for the precious metals.  Trading in gold also came as global equity markets attempted to rebound from a selloff that saw the S&P 500 register its worst percentage fall since May 12.

Gold futures fall to their lowest settlement in about 6 months

Oil futures ended lower in volatile trading, as official gov data showed that US crude inventories climbed for the first time in 8 weeks & an index for the $ strengthened to highest level in about a year.  Nov West Texas Intermediate (WTI) crude fell 46¢ (0.6%) to settle at $74.83 a barrel, following a modest loss of 0.2% yesterday.  Nov Brent crude, the global benchmark, declined by 45¢ (0.6%) to $78.64 a barrel, ahead of its expiration at the end of tomorrow's trading session.  The most active Dec Brent contract fell 26¢ to $78.09.  Prices for both WTI & Brent crude settled Mon at highs not seen for a front-month contract since Oct 2018.  The EIA reported that US crude inventories rose by 4.6M barrels last week.  That defied expectations for an average decline of 4.5M barrels expected.  The American Petroleum Institute yesterday reported a 4.1M-barrel increase, according to sources.  The weekly increase for crude inventories reported by the EIA followed 7 consecutive weeks of declines.  Crude stocks at the Cushing, Okla, storage hub, meanwhile, edged up by 200K barrels for the week & total US petroleum production also rose by 500K barrels to 11.1M barrels per day.  Still, at 418M barrels, US crude oil inventories are about 7% below the 5 year average for this time of year, according to the EIA.

Oil prices end lower as U.S. crude supplies mark first increase in 8 weeks

Buyers kept prices higher until the last ½ hour of trading when selling dragged down the averages.  Dark clouds for investors have not gone away & the most worrisome now are the ones over DC.  The goings on there are all political which makes it impossible to figure out what is going on.  Fri is the new year for federal spending & there is NO budget.  Then there is the nagging problem of the raising the debt ceiling.  Meanwhile Dems can't figure out how to move forward on their monster spending programs which threaten future inflation.  After selling in the first ½ hour of trading, the Dow finished at the low end the day's trading zone at up less than 100.  Many traders are nervous with what's going  on (or not going on) in DC.

Dow Jones Industrials