Dow finished down 54 with a little selling into the close, advancers over decliners 2-1 & NAZ was off 15. The MLP index was steady in the 202s & the REIT index went up 2 to the 455s. Junk bond funds continued higher & Treasuries were a bit lower with yields little changed. Oil rose 1+ to the 93s & gold climbed 12 to 1868 (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)
The Biden administration is telling Congress that it needs an additional $30B to press ahead with the fight against COVID-19, officials said. 2 leakers with the administration's plan confirmed key details: $17.9B for vaccines & treatments, $4.9B for testing, $3B to cover coronavirus care for uninsured people & $3.7B to prepare for future variants. Separately, Sen Roy Blunt said he'd spoken with Health & Human Services Secretary Xavier Becerra & that "I think they are going to be proposing a $30 billion supplemental." White House press secretary Jen Psaki addressed the need for more money without specifying the amount being sought. "While we continue to have sufficient funds to respond to the current omicron surge in the coming weeks, our goal has always been to ensure that we are well prepared to stay ahead of the virus," she said. According to the nonpartisan Committee for a Responsible Federal Budget, Congress has already approved $5.8T to battle the pandemic in a series of major bills spanning the Trump & Biden administrations. That's not counting actions by the Federal Reserve to help keep the economy going. Psaki said most of the money from Pres Biden's 2021 coronavirus relief bill has been spent or allocated, with 90% going for such priorities as vaccines, testing & support for schools. It's unclear how the new request for supplemental funding will fare in Congress. Reps would like to see more COVID-19 relief for businesses still struggling with the pandemic, while Dem progressives want a major effort to vaccine the rest of the world.
Biden admin is telling Congress it needs MORE money
Federal Reserve officials set plans into motion at their most recent meeting to begin raising interest rates & shed the Ts of dollars in bonds on the central bank balance sheet, according to minutes just released. Some officials expressed concerns over financial stability, saying that loose monetary policy could be posing a substantial risk. They indicated that interest rate hikes likely are on the way soon, & said the unwind of the bond portfolio could be aggressive. “Participants observed that, in light of the current high level of the Federal Reserve’s securities holdings, a significant reduction in the size of the balance sheet would likely be appropriate,” the minutes stated. The policymaking FOMC decided that it would not raise interest rates yet but strongly indicated a hike is on the way as soon as Mar. In addition, the committee set out procedures for how it will start unwinding its nearly $9T balance sheet, which consists largely of bonds it has purchased in an effort to drive down rates & stimulate growth. Mar is also the month when the asset purchase program is set to end, though some members at the meeting were hoping for a faster conclusion. Instead, the committee set forth a path in which the Fed will buy $20B in Treasuries over the next month & nearly $30B in mortgage-backed securities. “A couple of participants stated that they favored ending the Committee’s net asset purchases sooner to send an even stronger signal that the Committee was committed to bringing down inflation,” the minutes added. Since the meeting, fresh inflation readings have shown prices rising at the fastest pace in 40 years. The Fed targets inflation to average around 2% & officials have conceded that policy needs to get tighter to bring prices down. Inflation occupied a good deal of the discussion during the meeting. The term is mentioned 73 times in the summary, with members saying that price increases have been stronger & more persistent than they had anticipated.
Federal Reserve releases minutes from its January meeting
Homebuyers are facing one of the priciest housing markets in history & that means they need larger mortgages than ever before. While mortgage demand is falling, due to rising interest rates, the size of the average purchase loan application just set a record. Mortgage applications to buy a home fell 1% last week compared with the previous week, according to the Mortgage Bankers Association's (MBA) seasonally adjusted index. Volume was 7% lower than the same week one year ago. “Purchase applications saw a modest decline over the week, with government purchase applications accounting for most of the decrease,” said Joel Kan, an MBA economist. “Prospective buyers still face elevated sales prices in addition to higher mortgage rates. The heavier mix of conventional applications again contributed to another record average loan size at $453,000.” Home prices have been climbing steadily as demand continues to outstrip the supply of houses for sale. While the increases had moderated at the end of last summer, they are now widening again. Prices nationally were up 18.5% year over year in Dec. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($647K or less) increased to 4.05% from 3.83%, with points rising to 0.45 from 0.40 (including the origination fee) for loans with a 20% down payment. The rate was 107 basis points lower the same week one year ago. “Mortgage rates increased across the board last week following the recent rise in Treasury yields, which have moved higher due to unrelenting inflationary pressures and increased market expectations of more aggressive policy moves by the Federal Reserve,” added Kan. The sharp rise in mortgage rates over the last several months has cut refinance demand dramatically. Application volume was down 9% for the week & was 54% lower than the same week one year ago. The refinance share of applications decreased to 52.8% of total applications from 56.2% the previous week, the lowest level since Jul 2019.
The average size of a new mortgage just set a record, as home prices continue to climb
Gold futures posted their highest finish since Jun, rebounding from a loss in the previous session, as markets reacted to shifting headlines on the tensions between Russia & Ukraine. A NATO official said there are no signs of a Russian troop withdrawal near Ukraine, meaning an invasion by Russia might still be imminent, lifting the bullish case for bullion. Gold for Apr rose $15 (0.8%) to settle at $1871 an ounce. That's the highest most-active contract finish since Jun. The gain comes just a day after prices suffered their first loss in 8 sessions. The minutes of the Federal Reserve's Jan meeting, released after the settlement for gold futures, revealed officials agreed that uncertainty regarding the path of inflation was “elevated,” & “risks to inflation were weighted to the upside.” They also anticipated that it would “soon be appropriate to raise the target range.” Investors have been fixated on how quickly the central bank might raise interest rates as it attempts to combat surging inflation. Early today, investors parsed sales for US retailers, which jumped 3.8% in Jan. The increase in sales was the largest since last Mar, when Americans spent a good chunk of their stimulus money from the gov. Economists had forecast after retail sales fell a revised 2.5% in Dec.
Gold settles at 8-month high as tension over Ukraine resurfaces
Oil futures ended higher as NATO's chief said Russia's military buildup around Ukraine continued, even as Moscow said it was returning troops & equipment to bases. Crude prices rose despite an unexpected weekly rise in domestic crude inventories. Natural-gas futures, meanwhile, finished nearly 10% higher, as US cold weather forecasts raised demand prospects. Mar West Texas Intermediate crude rose $1.59 (1.7%) to settle at $93.66 a barrel. Apr Brent crude the global benchmark, added $1.53 (1.6%) at $94.81 a barrel. Both WTI & Brent closed Mon at their highest since 2014. Mar natural gas rose 9.5% to $4.717 per M British thermal units. Oil prices fell back yesterday after Russia said it was returning some troops to base after completing military exercises. But NATO Secretary-General Jens Stoltenberg today said there were no signs of any de-escalation on the ground. “On the contrary, it appears that Russia continues the military buildup,” he said. Pres Biden yesterday said that a Russian pullback had not been confirmed & that an invasion remained “distinctly possible.” Meanwhile, natural-gas futures rallied, buoyed by colder-than-expected US weather forecasts. There's also spillover support from Russia-Ukraine tensions, which supports the possibility of stronger US natural-gas exports.
Oil ends higher on uncertainty over Ukraine; cold weather lifts natural gas by nearly 10%
Traders read the minutes from the Fed meeting & bought stocks. The Dow shot up 300 in the next hour & that was followed with a little selling into the close. The Dow is now up 200 for the week. Hard to believe. And gold & oil continue to be in strong demand.
Dow Jones Industrials
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