Markets were mixed as investors weigh Covid and inflation prospects

Dow went up 90 for a new record, advancers over decliners about 5-4 & NAZ was off 15.  The MLP index was off 1 to the 175s & the REIT index rose 3+ to the 509s.  Junk bond funds fluctuated & Treasuries were heavily sold, raising long term interest rates.  Oil traded higher in the 76s & gold gave back 5 to 1805 (more on both below).

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Pending home sales unexpectedly fell in the month of Nov as homebuyers were hesitant to buy due to higher prices.  The National Association of Realtors' (NAR) pending home sales index, which tracks the number of homes that are under contract to be sold, slipped 2.2% to 122.4 in Nov on a monthly basis.  The latest reading came in short of the 0.5% increase expected & well below Oct's 7.5% increase.  On a year-over-year basis, contract signings slid 2.7%.  An index of 100 is equal to the level of contract activity in 2001.  All regions in the US posted declines in pending home sales.  The Midwest saw the biggest drop, falling 6.3% last month.  Signings in the West fell 2.2%, while sales in the South & Northeast declined 0.7% & 0.1%, respectively.  NAR chief economist Lawrence Yun attributed the drop to low housing supply & buyers being hesitant about home prices.  Yesterday, S&P CoreLogic Case-Shiller reported that its 20-city composite index surged 18.4% year over year in Oct, marking the 6th-largest annual gain on record for home prices, but down from the previous month's growth of 19.1% on an annual basis.  Total housing inventory at the end of Nov amounted to 1.1M units, down 9.8% from Oct & down 13.3% from a year ago.  Unsold inventory sits at a 2.1-month supply at the current sales pace, a decline from both the prior month & from a year ago.  Yun said housing demand continues to be high, with homes placed on the market for sale going from listed status to under contract in approximately 18 days.  "Buyer competition alone is unrelenting, but home seekers have also had to contend with the negative impacts of supply chain disruptions and labor shortages this year," he explained.  "These aspects, along with the exorbitant prices and a lack of available homes, have created a much tougher buying season."  Looking ahead, Yun warns that a countrywide surge of the omicron COVID-19 variant poses a risk to the housing market's performance by sidelining buyers & sellers & delaying home construction.

Pending home sales fall 2.2% as rising prices make buyers hesitant

US Covid cases have hit their highest level of the pandemic as 2 highly infectious variants circulate throughout the country & health officials urge Americans to get vaccinated & boosted against the virus.  Nationwide daily new cases were at a record 7-day average of more than 265K as of yesterday, according to data compiled by Johns Hopkins University, surpassing the previous high mark of about 252K average daily cases set in Jan.  The fresh pandemic peak comes as the delta & omicron variants are spreading simultaneously.  The previously dominant delta variant was already driving US case counts higher this fall before the emergence of omicron, which is contributing to a near-vertical rise in daily new cases.  About 75K Americans are hospitalized with Covid-19 & the country is reporting more than 1500 daily deaths.  Though both figures are rising, they are lower than when the last daily case record was set nearly a year ago, before Covid vaccinations were widely available.  Hospitalizations topped 137K at that point, according to a 7-day average of data from the Dept of Health & Human Services & Johns Hopkins data shows the average death toll was more than 3200 per day.  Roughly 62% of the US population is fully vaccinated with two doses of the Pfizer (PFE) or Moderna (MRNA) shots or one dose of the Johnson & Johnson (JNJ) vaccine, according to the Centers for Disease Control & Prevention (CDC).  In the US, omicron represented 59% of sequenced Covid cases while delta represented 41% last week, according to CDC estimates.

U.S. Covid cases rise to pandemic high as delta and omicron circulate at same time

Investors believe inflation will remain a major roadblock for markets CNBC Delivering Alpha investor survey.  400 chief investment officers, equity strategists, portfolio managers & CNBC contributors who manage money about where they stood on the markets for the rest of 2021 & next year.  The survey was conducted this week.  More than ½ of the respondents said inflation is their biggest worry for 2022.  30% said the Federal Reserve raising rates at the wrong time is their top concern, while 17% said the economic impact of a lingering pandemic is their #1 worry.  For months, investors have watched a variety of inflation data points show their highest levels in decades.  The consumer price index, which measures the cost of a wide-ranging basket of goods & services, surged 6.8% on a year-over-year basis in Nov, the fastest rate since 1982.  The Fed signaled it will make aggressive policy moves in response to rising inflation, including accelerating the reduction of its monthly bond purchases.  Fed officials also see as many as 3 rate hikes coming next year.  More than 50% of the survey respondents expect the S&P 500 to go up less than 10% in 2022.  Nearly 18% think the market will produce another double-digit year, while 10% see a flatline for stocks.  Among different asset classes, equities are still investors' top choice.

Investors fear inflation most in 2022

The US trade deficit in goods mushroomed to a record in Nov as imports surged & exports slipped.  The goods trade deficit widened last month by 17.5% to $97.8B from $83.2B in Oct, the Commerce Dept reported.  That exceeds the previous record deficit set in Sep of $97B.  Goods exports declined 2.1%, while imports rose by 4.7%.  The report also showed wholesale inventories climbed 1.2% last month.  Retail inventories increased 2.0%.  Retail inventories, excluding autos, which go into the calculation of GDP, edged up by 1.3%.  The economy grew at a 2.3% annualized rate in Q3, a step-down from earlier in the year but activity has rebounded in Q4.  Trade has been a drag on GDP growth for 5 straight qtrs, while inventories added to output in Q3.

U.S. goods trade deficit hits a record in November

Gold futures closed lower, but the precious metal finished above a psychological significantly level, after steeper losses dragged it below $1800, a price that the contract has struggled to hold above since Nov.  The decline for the yellow metal came amid some weakness in the $ & a rise in longer dated Treasury yields.  Feb gold was trading $5 lower to end at $1805 an ounce & had fallen to an intraday low at $1789, following a tiny gain yesterday with bullion then touching an intraday peak at $1821 before gains faded.  Gold futures have been trading in a relatively tight range over the past month as concerns about the omicron variant of the coronavirus & uncertainty around the effectiveness of policies to combat inflation have buffeted markets. 

Gold ends lower, but intraday recovery pushes metal back above $1,800

Crude oil futures finished higher, extending this month's rally, after data showed a big drop in US crude inventories, pointing to more robust demand despite the threat of the omicron variant of COVID disrupting some business activity & holiday travel.  The Energy Information Administration (EIA) reported that US crude inventories fell by 3.7KM barrels last week, while sources said the American Petroleum Institute yesterday reported crude-oil inventories fell 3.1M barrels for the same weekly period.  The EIA also reported that gasoline supplies declined by 1.5M barrels, as distillate stocks fell by 1.7M barrels.  However, crude supplies in Cushing, Okla, increased by 1.1M barrels.  The report also indicated that US production rose to highs not seen since May of 2020.  A report said support earlier in the week for crude was underpinned by force majeure declarations this month by Ecuador, Libya & Nigeria, tied to some oil production & maintenance issues.  Investors are also relieved that preliminary evidence suggests the omicron variant of COVID produces milder symptoms & won't lead to harsh restrictions on commerce & travel.  Still, the World Health Organization has said the number of COVID-19 cases recorded world-wide increased by 11% last week compared with the previous week, with the biggest increase in the Americas.  Against that backdrop, oil has been higher, near prices not seen since late Nov.  West Texas Intermediate (WTI) crude for Feb was trading 58¢ (0.8%) to settle at $76.56 a barrel, after the US benchmark rose 0.5% yesterday to mark the highest settlement since Nov 24.  Feb Brent crude, the global benchmark, was trading 29¢ (0.4%) higher to close at $79.23 a barrel, after rising 0.4% to the highest price since Nov 25.  For the week, so far, WTI has risen 4.4% & Brent has climbed 5.4%, with both contracts heading for YTD gains of well over 54% after a rise in Dec of at least 15%.  Meanwhile, OPEC+ will assess its plans to boost daily oil production among its members to 400K bpd starting in Feb or adjust its output to factor the spread of COVID.  OPEC+ will meet on Jan 4 to discuss global output strategy.  OPEC+ has resisted calls to boost output because it “wants to provide the market with clear guidance and not deviate from policy on gradual output increases, according to Russian Deputy Prime Minister Alexander Novak.

U.S. oil ends back at 5-week high as EIA data show weekly crude drop of 3.6 million barrels

Dow had its 6th straight advance, but in listless trading.  Inflation & the fight with the virus are getting the most attention by investors.  The Dow is up 1K from it recent low which began the rally, but without a lot of excitement.

Dow Jones Industrials