Markets dipped lower as investors weigh mixed Omicron variant results

Dow was off pennies, decliners over advancers 5-2 & NAZ was up 269.  The MLP index fell 1+ to 175 & the REIT index dropped 6+ to the 484s.  Junk bond funds continued to be sold & Treasuries saw more strength.  Oil was off 1+ going under 71 & gold fell 8 to 1775 (more on both below).

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A deal between Senate Minority Leader Mitch McConnell & Majority Leader Chuck Schumer to allow the Senate to raise the debt ceiling with a simple majority was made, with a key procedural vote, setting Congress on a glide path to averting a debt default.   The bill cleared a cloture vote 64-36, with 13 Reps joining McConnell to advance the bill.  This comes after months of Reps saying they would not help Dems raise the debt ceiling due to the partisan nature of Dems' massive spending bills.  Reps demanded Dems use budget reconciliation to raise the debt ceiling, but Schumer refused.  Congress flirted with a debt default once in Oct before the leaders came to a temporary deal.  And the US was set for a potential default on its debt later this month with the expiration of that deal before McConnell & some Reps backed this deal to let Dems implement a longer-term debt limit extension.  "I believe we've reached here, a solution… that's consistent with Republican views of raising the debt ceiling," to a specific number, "and allows the Democrats to proudly own it, which they're happy to do," McConnell said earlier this week.  The procedurally creative deal between McConnell & Schumer used a bill preventing Medicare cuts as a vehicle for language allowing the Senate to increase the debt limit via a simple majority vote on a one time basis.  This vote pushed that bill past the 60-vote cloture hurdle, setting up a simple majority vote on final passage later today or tomorrow.   Once that bill is signed into law by Pres Biden, Congress will be able to pass a debt limit increase without having to navigate a filibuster in the Senate.  That enables all Reps to vote against the actual debt limit increase when it comes to the floor, likely next week.

McConnell-Schumer debt ceiling deal clears major hurdle

The World Health Organization (WHO) said the highly mutated omicron variant of Covid-19 could change the course of the pandemic.  The exact impact is “still difficult to know,” WHO Director-General Tedros Adhanom Ghebreyesus said.  Scientists across the world are scrambling to determine just how contagious  & lethal the mutated virus has become.  “Certain features of omicron, including its global spread and large number of mutations, suggest it could have a major impact on the course of the pandemic,” Tedros added.  Genetic changes to the virus affect its virulence & indicate it could be considerably more infectious than previous strains.  Maria Van Kerkhove, the WHO's technical lead on Covid-19, said preliminary evidence from South Africa may suggest that omicron is milder than the delta strain but it is “too early to conclude” that fact.  Patients in the country with a more mild course of disease may not have gone thru the full course of the infection yet, she added.  “It’s too early to tell,” Van Kerkhove said during the briefing.  “I just only wanted to caution against any conclusions about the severity of omicron yet.”  However, she noted that vulnerable patients who are older, unvaccinated or have underlying conditions have a much higher risk of developing severe disease.  WHO’s remarks comes as the omicron variant has been found in 57 countries across the world.  New cases “plateaued” worldwide over the last week.  There were more than 4M new confirmed cases reported across the world, similar to the figures from the previous week.  Deaths worldwide, however, increased by 10% over the last week.  Over 52K new deaths were reported.

WHO says omicron variant could change the course of the Covid pandemic

Nearly 2 years & 6 relief bills into the pandemic, the US has spent the majority of its available Covid rescue funding.  But Bs of $s across a handful of categories have not gone out the door.  Beginning under then-Pres Trump & continuing thru Pres Biden's administration, Congress has approved some $4.5T in total aid spending, according to Treasury Dept data.  Federal agencies have formally committed to using about $4T of that & have made $3.5T in actual payments.  It can often take time for the total pot of funds approved by lawmakers to make its way to the American people because gov agencies such as the Small Business Administration & the Dept of Labor go thru a process of legally committing to a portion of allotted funding, which is known as obligating.  They then start to actually spend it.  The $500B or so in available relief resources that have not been obligated may not end up being spent by agencies.  There are deadlines for making these commitments & they could span years.  The details also vary by program.  Funds that are not eventually obligated are returned for other gov uses.  What agencies can commit to spending may differ from the initial estimates put forth in bills, or they may just plan to use the funds over a long-term period, said Kristen Kociolek, a director with the Government Accountability Office's financial management & assurance team.  A Congressional Budget Office estimate of outlays from Mar 2021's nearly $2T American Rescue Plan, for example, shows 40% of total spending is set to take place in 2022-2030.  Education, health care & disaster relief are among the areas where the gov has spent only a share of obligated funds according to analysis of Treasury data compiled by the Pandemic Response Accountability Committee (PRAC).  The agency was created as part of the Mar 2020 CARES Act to support oversight of pandemic relief spending.

The U.S. has used most of its Covid relief funding, though billions are unspent

Gold futures settled lower for the first time in 3 sessions, with strength in the $ pressuring prices for the precious metal, as easing worries surrounding the omicron variant of the coronavirus dulled haven demand.  Looking ahead, before the Federal Reserve meeting on monetary policy next week, the market will see the US consumer price index data for Nov tomorrow & producer price index data Tues.  Feb gold declined $8 (0.5%) to settle at $1776 an ounce, following a gain of only chump change yesterday.  Bullion's slight gain a day ago helped it notch its first back-to-back advance of the month.  The $ was up 0.4% at 96.245, as measured by the ICE US Dollar Index, a gauge of the buck against a ½-dozen rivals.  Prices for the precious metal continued to trade lower in reaction to data early today showing US weekly jobless claims down 43K to a 52-year low of 184K.  Meanwhile, a downgrade of China property company China Evergrande by Fitch Ratings was blamed for some of the downbeat action in financial markets, with the $ drawing haven bids & undercutting appetite for other assets that are perceived as havens.  Evergrande has been at the center of concerns about the Chinese economy, the 2nd largest in the world, & its overleveraged property market.

Gold prices settle lower after back-to-back session gains

Oil futures settled lower, with the US crude benchmark putting an end to a 3-session streak of gains that had lifted prices to a 2-week high a day earlier.  Restrictions recently imposed in parts of the world to combat the omicron variant of coronavirus were being blamed for putting some pressure on energy demand & crude oil prices.  UK Prime Minister Boris Johnson yesterday recommended remote work where possible & advocated mask-wearing in public venues.  Countries including Denmark & China also have imposed some level of mobility restrictions to limit the spread of the contagion.  The measures are being imposed even as a report to from Pfizer (PFE) & BioNTech (BNTX) said results from an “initial laboratory study” showed that their COVID-19 vaccine neutralized the omicron variant of the coronavirus after 3 doses, or the full 2-dose regimen plus a booster shot.  West Texas Intermediate crude for Jan fell $1.42 (2%) to settle at $70.94, after rising yesterday by 0.4% to end at the highest level since Nov 24 for a most-active contract, marking a 3rd straight daily gain.  Feb Brent crude declined by $1.40 (1.9%) to end at $74.42 a barrel.  That followed a 0.5% rise for the global benchmark in the prior session, which helped it notch its 5th straight gain & its highest finish since Nov 25.  Yesterday's loss marked the first session decline for Brent since Dec 1.  The Energy Information Administration (EIA) reported that US crude inventories fell by a 200K barrels last week.  That marked a 2nd weekly decline, but it was smaller fall than the 1.2M-barrel decline for the estimate.  EIA data also showed stocks in the Strategic Petroleum Reserve declined by 1.7M barrels to 601M barrels last week, while total domestic petroleum stocks inched up by 100K barrels to 11.7M barrels per day. Crude stocks at the Cushing, Okla, Nymex delivery hub, edged up by 2.4M barrels for the week.

U.S. oil prices settle lower, ending a 3-session streak of gains

After the recent rally, profits were taken today.  More inflation data is coming in the coming trading days & they are not likely to be pretty.  Next week the Fed will decide how aggressive to get on tapering its bond buying program & on its plans to increase interest rates.  Strong employment data may give those guys courage to get more aggressive with their strategies.

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