Markets finish lower while nervousness about inflation data persists

Dow dropped only 163 (430 above early lows), decliners over advancers 5-2 & NAZ crawled up 6 (400 above session lows).  The MLP index fluctuated near 191 & the REIT index fell 3 to the 487s.  Junk bond funds were mixed & Treasuries found support in late day trading which trimmed the advances in Treasury yields.  Oil dropped almost 1 to 78 & gold was up 3 to 1800 (more on both below). 

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The Federal Reserve released the minutes from its Dec meeting Wed, which revealed the possibility of earlier & faster rate hikes as inflation continues to soar.  After the meeting, the Fed announced it was doubling its taper rate & considering up to 3 rate increases in 2022   Now, the minutes showed that members of the  FOMC discussed the possibility of raising rates sooner than originally planned.  "Participants generally noted that, given their individual outlooks for the economy, the labor market, and inflation, it may become warranted to increase the federal funds rate sooner or at a faster pace than participants had earlier anticipated," the minutes stated.  "Some participants also noted that it could be appropriate to begin to reduce the size of the Federal Reserve’s balance sheet relatively soon after beginning to raise the federal funds rate."  If you want to take advantage of low interest rates before they begin to increase this year, you could consider refinancing your mortgage to lower your interest rate & monthly payment.  The central bank focused its attention on "surprisingly high inflation," noting that it has surpassed their previous expectations.  "Participants remarked that inflation readings had been higher and were more persistent and widespread than previously anticipated," the minutes stated.  "Some participants noted that trimmed mean measures of inflation had reached decade-high levels and that the percentage of product categories with substantial price increases continued to climb."  "While participants generally continued to anticipate that inflation would decline significantly over the course of 2022 as supply constraints eased, almost all stated that they had revised up their forecasts of inflation for 2022 notably, and many did so for 2023 as well," the minutes continued.  Inflation hit a 39-year high in Nov as the Consumer Price Index (CPI) rose 6.8% annually, according to the Bureau of Labor Statistics (BLS).  As inflation increases, the Fed could begin to shift its monetary policy & move up its anticipated rate hikes, increasing the federal funds rate in 2022 sooner than expected.  "They noted that current conditions included a stronger economic outlook, higher inflation, and a larger balance sheet and thus could warrant a potentially faster pace of policy rate normalization," the minutes stated.

Fed’s December meeting reveals possible earlier, faster interest rate hikes

Johnson & Johnson (JNJ), a Dow stock & Dividend Aristocrat, announced in Nov that it plans to spin off its consumer business into a new publicly traded company by Nov 2023.   JNJ is the biggest pharmaceutical company in the US based on market cap & is ranked 36th on the 2021 Fortune 500 List of the largest US corps based on total revenue.  The company has experienced div growth for nearly 60 years & has consistently outperformed the S&P 500 for the past 25 years.  So far, investors' reaction to the spinoff has been mild, with the stock moving only modestly higher on the news in Nov.  There are other potential headwinds to the split.  The company has been dealing with numerous legal challenges over the past several years, many of which are ongoing & could result in as-yet-unknown fines & settlements.  The stock was off 92¢.
If you would like to learn more about JNJ click on this link:
club.ino.com/trend/analysis/stock/JNJa_aid=CD3289&a_bid=6ae5b6f  

Johnson & Johnson is spinning off its consumer division, which could be risky

Moderna (MRNA) is working on a booster shot that will target the omicron variant of Covid for this fall as nations around the world prepare to distribute annual vaccinations against the virus.  “We are discussing with public health leaders around the world to decide what we think is the best strategy for the potential booster for the fall of 2022. We believe it will contain omicron,” CEO Stephane Bancel said.  Bancel said the omicron-specific booster will enter clinical trials soon, & MRNA is discussing whether the shot needs to contain any other components to fight the virus.  “We need to be careful to try to stay ahead of a virus and not behind the virus,” he added.  MRNA has signed advanced purchase agreements with upfront payments worth $18.5B with the UK, South Korea & Switzerland recently ordering shots for this fall.  Bancel said the company can supply 2-3B booster doses this year.  “There are discussions ongoing on a daily basis. We want to be ready with the best product possible for the fall of ’22,” Bancel said.  The world is currently suffering from an unprecedented wave of infection due to omicron, which has dozens of mutations that allow it to avoid the immune protection induced by the original shots.  The World Health Organization has said omicron is spreading faster than any other previous variant of the virus.  The stock jumped 19.84 (9%).
If you would like to learn more about JNJ click on this link:
club.ino.com/trend/analysis/stock/JNJa_aid=CD3289&a_bid=6ae5b6f

Moderna working with world health leaders on Covid booster for this fall that targets omicron

Gold finished with a gain, finding modest support after suffering the sharpest weekly slump since late Nov, but prices still marked a 3rd straight settlement below the key $1800 mark.  Feb gold edged up by $1 to settle at $1798 an ounce.  That marked a 3rd consecutive settlement below $1800 & followed a 1.7% weekly slide for the commodity — the steepest weekly decline since Nov 26.  The $ strengthened, with the ICE U.S. Dollar index up 0.3% at 95.974, pressuring prices for $-denominated gold prices, while 10-year Treasury note yields rose to 1.782%, dulling interest in the yellow metal, which doesn't bear any interest.  Gold prices topped $1800 in intraday trading today, but haven't settled above that level since Wed.  Gold has been pressured by prospects of tighter monetary policy from the Fed & it is unclear what, if any impact, the Fri figures will have on the central bank, which next meets Jan 25-26.  Commodity investors may be looking out for data on inflation, starting with a reading of the consumer-price index on Wed & an update on US retail sales on Fri, which could influence trade in gold.

Gold finishes slightly higher, but settles below $1,800 for a third straight session

Oil futures edged lower, as traders weighed supply disruptions in Kazakhstan & Libya against the threat to energy demand posed by the omicron variant of the coronavirus.  Oil supply took a hit last week on the back of protests in Kazakhstan, while Libya has seen declines in oil output due to pipeline maintenance, weeks after militias first shut down major oil fields.  Around 300K barrels per day of oil production remained shut in as a blockage at Libya's key western oil fields remained in place, but the country's output has recovered to around 900K barrels per day after pipeline maintenance at the eastern Waha oil fields was completed.  West Texas Intermediate (WTI) crude for Feb fell 67¢ (0.9%) to settle at $78.23 a barrel, after posting a loss on Fri.  Mar Brent crude, the global benchmark, declined by 88¢ (1.1%) at $80.87 a barrel.  Last week, WTI, the US benchmark, rose 4.9%, while Brent advanced more than 5%.  Worries about COVID's impact on demand continued to pressure oil.  Chinese authorities in the northern coastal city of Tianjin, after the detection of 2 cases of COVID-19 caused by the omicron variant of the coronavirus, ordered the testing of Ms of people weeks ahead of the start of the Winter Olympics in nearby Beijing.  China has been sticking to a “zero-COVID policy” entailing strict lockdowns & mass testing in response to outbreaks.  Chevron (CVX), a Dow stock & Dividend Aristocrat, said the Tengizchevroil consortium it leads is gradually restoring production at Kazakhstan's Tengiz oil field after civil unrest led to a reduction in output by an unspecified amount last week.  US & Russian negotiators held talks in Geneva today amid Moscow's military buildup near Ukraine, but Deputy Secretary of State Wendy Sherman referred to the event as a “discussion,” & “not what you call a negotiation.”  Further meetings are expected to be held in Brussels & Vienna later this week.

Oil ends lower as traders weigh supply disruptions and omicron’s threat to energy demand

Bargain hunters returned in the PM & the stock averages finished well off session lows.  However, all is not well in the stock market.  There is plenty of nervousness about inflation data that will be reported this week & the war with Covid continues to be messy without any conclusion coming over the near term.

Dow Jones Industrials