Dow dropped 204. decliners over advancers 3-2 & NAZ went up 90. The MLP index declined 3+ to the 181s (along with lower oil prices) & the REIT index slid in the 482s. Junk bond funds were flattish & Treasuries saw heavy buying. Oil sank 2+ to the 76s & gold added 1 to 1862.
AMJ (Alerian MLP index tracking fund)
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House lawmakers voted to pas Pres's expansive spending bill despite opposition from Reps & lingering questions about the White House's claim that the cost of its policies will be fully covered. The vote was 220-213 with Rep Jared Golden, the only Dem breaking with his party to oppose the bill. House Speaker Nancy Pelosi aimed to vote on the bill but House Minority Leader Kevin McCarthy delivered a marathon, scathing floor speech, that lasted more than 8½ hours, forcing the vote today. He said Dems are "out of touch" with ordinary Americans as he railed against the bill. "From bank surveillance to bailouts, this bill takes the problems President Biden and Democrats have already created and makes them much, much worse," McCarthy said. His speech was the longest floor speech in House of Representatives history. Dubbed the "Build Back Better Act," the $1.75T bill includes massive investments in Dem-backed social programs & actions aimed at cutting carbon emissions. Spending on green energy & climate-related initiatives alone would exceed $550B. The legislation includes funding for expanded child & home care, paid leave, expanded healthcare coverage, an extension on child tax credit payments, green energy investments & tax credits, universal pre-K, affordable housing & various other programs. The Biden administration & top Dem officials say the bill's costs will be fully covered by offset measures included in the spending bill. Those measures include tax hikes on corps & the wealthiest Americans, increased IRS tax enforcement & prescription drug pricing reform. The White House says the offsets will generate approximately $2T in new revenue thru 2023, enough to pay for the "Build Back Better Act" & eventually, to reduce the federal deficit. But an analysis from the Congressional Budget Office released earlier in the day contradicted that claim. The CBO determined the spending bill would add $367B to the federal deficit over 10 years, not including the IRS plan's impact. Separately, the nonpartisan agency determined increased IRS tax enforcement would generate about $127B in new revenue, far below the $400B estimate touted by the Treasury Dept & the White House.
House passes Biden spending bill after months of delays
A round of major retail earnings this week revealed a stark divide in the industry between the retailers that are trying to keep prices low for customers amid rising inflation & those that are able to pass on costs to shoppers this holiday season. Big-box chains were punished by investors after delivering 3rd-qtr earnings reports, despite the results topping expectations. They have adopted a strategy that largely entails absorbing some of the rising costs of shipping, labor & materials rather than raising sticker prices. Businesses cited the need to uphold a reputation for value. But if you're in the business of selling a lot of apparel, it’s a different story. All retailers are navigating an environment where costs of everything from fuel to labor are climbing. Inflation hit a 3-decade high in Oct. The consumer price index — which includes a mix of products ranging from gasoline & health care to groceries & rents — rose 6.2% year over year, the most since 1990. Some categories have seen a bigger uptick than others, though. Food prices, for example, grew by 0.9% in Oct — with meat, poultry, fish & eggs collectively increasing 1.7%. Apparel prices remained flat.
With 30-year high inflation, investors reward the retailers who are willing to hike prices
If Lael Brainard is named Federal Reserve chair, the first move by financial markets may be to price in an even more dovish central bank. That means the Fed would be expected to take longer to raise interest rates or tighten policy than under Fed Chair Jerome Powell. Currently, traders are expecting the central bank to begin raising rates in H2-2022, once it winds down its bond-buying program. Until just recently, Powell was expected to be renominated to the chairmanship, but Pres Biden has now interviewed both Powell & Brainard & is expected to make an announcement by the weekend. Economists & investors perceive Brainard as more political, whether she proves to be or not. Bond strategists say if Brainard is nominated, market inflation expectations could rise, with inflation-related instruments moving higher, like Treasury inflation-protected securities. The spread between the yields of shorter-duration Treasury notes like the 2-year & longer-duration notes like the 10-year could widen, with the 10-year yield rising due to inflation concerns. Brainard, 59, has been a Federal Reserve Board governor since 2014. She was a former undersecretary of the Treasury for intl affairs, during the Obama administration.
If Biden picks Brainard over Powell for Fed chief, expect an immediate market impact
The pork bill was passed, supported only by the Dems. At a time with inflation is on the rise, more spending on pet projects was not welcomed by investors. Gold is holding at recent highs & there was significant purchasing of Treasuries. Now the bill goes to the Senate.
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