Dow shot up 338 with a little selling into the close, advancers over decliners 5-1 & NAZ gained 150. The MLP index went up 4+ to the 176s & the REIT index rose 4+ to the 464s. Junk bond funds hardly budged & Treasuries drifted lower in price. Oil jumped 1+ to about 72 & gold was flattish at 1769 (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)
Pres Biden is slated to hold a series of meetings today with Dem lawmakers, including party leaders, as he attempts to head off an intraparty war between moderates & progressives that could derail his $4T economic agenda. Biden is expected to meet with House Speaker Nancy Pelosi & Senate Majority Leader Chuck Schumer, as well as a broad range of Dems from across the ideological spectrum, according to a person familiar with the matter. The burst of meetings comes as Dems jockey for control in a narrowly divided Congress, a battle that could ultimately derail both parts of Biden's agenda: The $1T bipartisan infrastructure bill & a 2nd, multitrillion-dollar package that Dems plan to pass along party lines via budget reconciliation. "I hope he has the secret sauce," House Majority Leader Steny Hoyer said of Biden yesterday. "The president of the United States is always a very influential figure, and I know he wants both bills passed." At the heart of the division is a fight for leverage over the size & scope of the reconciliation bill: Progressives say that $3.5T is the bare minimum needed to vastly expand the social safety net & combat climate change. Centrists, however, are wary of another multitrillion-dollar bill – funded by a slew of new taxes on wealthy Americans & corps, no less – after the coronavirus pandemic pushed the US deficit to a record high. With their incredibly slim congressional majorities, Dems face a delicate balancing act in pursuing their so-called "two-track" agenda – approving both a bipartisan deal & a larger tax & spending bill – or they risk losing the support of either moderate or progressive members. In the House, where Pelosi has just 3 seats to spare, it's possible the progressive lawmakers could torpedo the bipartisan deal if it's not tethered to the larger reconciliation package that would build as the basis of Biden's economic agenda & establish health, education & environment programs. Pelosi last month committed to a Sep 27 deadline to vote on the infrastructure bill, which includes more than $500B in new funding for traditional projects like roads & bridges, in order to squelch a minor rebellion from centrist lawmakers. But progressive lawmakers are seeking similar assurances that the comprehensive spending package doesn't crumble amid some pushback from moderates in both the House & Senate, including Sens Joe Manchin & Kyrsten Sinema. Manchin has called for a "pause" in the reconciliation bill that Dems plan to pass along a party-line vote. Rep Pramila Jayapal, the chairwoman of the Congressional Progressive Caucus, has remained adamant that her members will not vote for the Senate-approved infrastructure bill until the upper chamber also passes the $3.5T bill. Asked yesterday about whether progressives were bluffing on their threat to vote down the bipartisan plan, Jayapal said: "Try us." At the same time, moderate Dems are also vowing to rebel if the left manages to upend the infrastructure bill that Biden has touted as a major bipartisan accomplishment. Dems are still crafting the bigger spending bill as they haggle over the specifics of what to include & how to pay for it. "This is critically important to the White House," Rep. Josh Gottheimer said. "I’m optimistic we’ll not only get it to the floor, but we’ll get the votes."
Biden struggles to head off intra-party war threatening to derail $4T agenda
The Federal Reserve held benchmark interest rates near zero but indicated that rate hikes could be coming sooner than expected & it significantly cut its economic outlook for this year. Along with those largely expected moves, officials on the policymaking FOMC indicated they will start pulling back on some of the stimulus the central bank has been providing during the financial crisis. There was no sign, though, as to when that might happen. “If progress continues broadly as expected, the Committee judges that a moderation in the pace of asset purchases may soon be warranted,” the post-meeting statement said. Respondents to a recent survey said they expect tapering of bond purchases to be announced in Nov & begin in Dec. In light of those expectations, the committee voted unanimously to keep short-term rates anchored near zero. However, more members now see the first rate hike happening in 2022. In Jun, when members last released their economic projections, a slight majority put that increase into 2023. The committee now sees GDP rising just 5.9% this year, compared to a 7% forecast in Jun. However, 2023 growth is now set at 3.8%, compared to 3.3% previously, & 2.5% in 2023, up one-tenth of a percentage point. Projections also indicated FOMC members see inflation stronger than indicated in Jun. Core inflation is projected to increase 3.7% this year, compared to the 3% forecast the last time members indicated their expectations. Officials then see inflation at 2.3% in 2022, compared to the previous projection of 2.1%, & 2.2% in 2023, one-tenth of a percentage point higher than the Jun forecast. Including food & energy, officials expect inflation to run at 4.2% this year, up from 3.4% in Jun. The subsequent 2 years are expected to fall back to 2.2%, little changed from the Jun outlook. In another move, the Fed said it would double the level of repurchase its daily market operations to $160B from $80B.
Federal Reserve holds interest rates steady, says tapering of bond buying coming ‘soon’
6 former Treasury secretaries urged Congress to take quick action to raise or suspend the US debt ceiling or else risk “serious economic and national security harm.” The warning from some of the nation's top economists joins a growing chorus of public- & private-sector voices that say failure to address the borrowing limit could push the fragile American economy into another economic downturn. The Treasury Dept estimates that they will likely have enough cash on hand to pay for the gov's bills thru some point in Oct, but have yet to offer a specific “drop-dead” date. Former Treasury secretaries told House Speaker Nancy Pelosi that even flirting with a first-ever US default could spook markets. “As former Treasury secretaries, we write to express our deep sense of urgency that Congressional leadership, working with the Administration and the President, move swiftly to initiate and complete a viable legislative process necessary to raise the debt limit,” they wrote. “Even a short-lived default could threaten economic growth,” the group added. “It creates the risk of roiling markets, and of sapping economic confidence, and it would prevent Americans from receiving vital services. It would be very damaging to undermine trust in the full faith and credit of the United States, and this damage would be hard to repair.”
Gold futures finished with a slight gain, then climbed even further in electronic trading after Federal Reserve officials suggested that the central bank may soon decide to taper its bond purchases & raise interest rates by late next year. Shortly after gold futures settled for the session, the Fed said that “if progress continues broadly as expected, the committee judges that a moderation in the pace of asset purchases may soon be warranted.” Also, in updated projections, the central bank penciled in 3 rate hikes in 2023 & 3 more in 2024, bringing the benchmark interest rate up to 1.8% by the end of the period. Gold prices saw a brief dip as the Fed indicated they would keep rate hikes on schedule, with at least 3 hikes to occur in 2023. Investors were looking for signs that the fiscal health of China's highly levered property developer Evergrande is giving the central bank any cause for concern about knock-on effects in the US & elsewhere. In electronic trading shortly after the Fed announcement, Dec gold traded at $1786 an ounce. The contract had settled at $1778 an ounce, up chump change for the session.
Gold ends with a slight gain, extends rise after Federal Reserve hints at taper timing
Crude-oil futures rose by more than 2%, finding support after gov data revealed that US inventories declined for a 7th week in a row, even as gasoline stockpiles unexpectedly climbed. West Texas Intermediate crude for Nov delivery rose $1.74 (2.5%) to settle at $72.23 a barrel. That was the highest front-month contract finish since yesterday. Nov Brent crude the global benchmark, added $1.83 (2.5%) at $76.19 a barrel. The Energy Information Administration (EIA) reported that US crude inventories fell by 3.5M barrels last week. That compared with the average decline of 3.8M barrels expected. The EIA had reported crude supply declines in each of the previous 6 weeks. The American Petroleum Institute, an industry group, reported that US crude supplies fell by 6.1M barrels for the week. The EIA data also showed crude stocks at the Cushing, Okla, storage hub edged down by 1.5M barrels for the week. However, total domestic petroleum production climbed by 500K barrels to 10.6M barrels per day last week.
Oil prices up over 2% as EIA reports a 7th straight weekly decline in U.S. crude inventories
The Fed held rates steady, but signaled 6-7 rate hikes thru 2024. Investor liked the sound of that. However the goings on in DC, with those guys throwing Ts around, should be disturbing to investors because chaos reigns. The same guys who gave us the Afghanistan disaster & the southern border crisis want to decide how to spend mind bogging amounts of money. That can aggravate inflation in an economy that is still a little fragile.
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