Dow went up 305 (session highs), advancers over decliners 5-2 & NAZ gained 295. The MLP index inched up in the 203s & the REIT index jumped 10+ to 470. Junk bond funds were in demand & Treasuries remained higher in price. Oil crawled higher in the 89s & gold rose 6 to 1834 (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)
Cleveland Federal Reserve Pres Loretta Mester laid out an aggressive plan for reducing easy-money policies this year, saying the central bank will be ready to hike rates at any meeting & should be looking at shedding mortgage-backed securities it is holding. “Each meeting is going to be in play,” Mester said. “We’re going to assess conditions, we’re going to assess how the economy’s evolving, we’re going to be looking at the risks, and we’re going to be removing accommodation.” Her comments come with markets widely expecting the Fed to raise its benchmark short-term borrowing rate at its Mar meeting. Traders are pricing in at least 4 more increases through the course of the year. Mester said she sees a Mar hike lately but doesn't expect to raise the rate by more than 25 basis points, a qtr percentage point, as is the norm. But she was emphatic that it's time for the central bank to start reversing the historically accommodative measures it took during the Covid pandemic crisis. “I don’t like taking anything off the table,” she added. “I don’t think there’s any compelling case to start with a 50 basis point [increase]. Again, we’ve got to be a little bit careful. Even though you can well telegraph what’s coming, when you take that first action, there’s going to be a reaction.” Mester is a voting member this year of the FOMC, which sets interest rates & other monetary policy measures. She noted she will be watching inflation closely. If it declines over the course of the year, that would lead to fewer rate hikes, while an acceleration would prompt more hawkish action. Another big question for the Fed this year is in how it will start reducing the portfolio of bonds it has acquired thru monthly purchases. The central bank’s total balance sheet is close to $9T, having doubled during the pandemic. The Fed is likely to allow some of the proceeds from its holdings to roll off each month while reinvesting the rest. However, Mester advocated a more active approach, in which the Fed would sell outright some of the $2.66T in mortgage-backed securities it is holding.
Fed's Mester says ‘each meeting is going to be in play’ for rate hikes this year
The World Health Organization (WHO) expects a more transmissible version of omicron to increase in circulation around the world, though it's not yet clear if the Covid subvariant can reinfect people who caught an earlier version of the omicron strain. Maria Van Kerkhove, the WHO's Covid-19 technical lead, said the global health agency is tracking 4 different versions of omicron. Van Kerkhove said the BA.2 subvariant, which is more contagious than the currently dominant BA.1 version, will likely become more common. “BA.2 is more transmissible than BA.1 so we expect to see BA.2 increasing in detection around the world,” Van Kerkhove added. The WHO is monitoring BA.2 to see if the subvariant causes an increase of new infections in countries that saw a rapid rise & then a sharp decline in omicron cases, she continued. Van Kerkhove emphasized that there's no indication of a difference in the severity of infections caused by either subvariant, though she noted that research is ongoing. Omicron generally doesn't make people as sick as the alpha & delta variants, though it does spread faster. The WHO is monitoring BA.2 to see if the subvariant causes an increase of new infections in countries that saw a rapid rise & then a sharp decline in omicron cases. Van Kerkhove said the shots remain highly effective at preventing severe disease & death, though they don't prevent all infections. She called on people to get vaccinated & wear masks indoors.
WHO says new omicron BA.2 subvariant will rise globally, but it’s unclear if it can reinfect people
Anyone out there searching for a new place to live knows there is not much to buy. Total supply & new listings are at record lows, & that means that what is on the market now is selling fast. Really fast. The average home spent just 61 days on the market, according to a Jan reading from Realtor.com. That is the fastest pace Realtor.com has recorded since it began tracking the metric in 2016. It's 10 fewer days than at the rate recorded in Jan 2021 & 29 fewer than the 2017-20 pace. Homes sold even faster in several metropolitan markets. Markets in the South saw the biggest yearly decline in the number of days it took to sell a home. Meanwhile, markets like Minneapolis, Richmond & DC, saw the time on the market increase slightly. The days are calculated from the day of listing to the closing date. Closings can take a while, especially given the labor shortage in the market. It is common to hear, anecdotally, that homes are going under contract in less than a week after multiple offers. Competition appears to be unusually fierce for Jan, which is usually one of the slowest months in the housing market. The spring market generally kicks off with Presidents Day weekend. Rising mortgage rates during the month may have scared potential buyers into stepping up their searches before rates price them out. The market is suffering from super lean supply. Builders are still hamstrung by rising costs for land & materials, as well as a severe labor shortage. And sellers are simply not stepping up. New listings in Jan were down 9% year-over-year & total inventory was down 28%. “Factors like omicron uncertainties could be causing sellers to hesitate even when they know housing conditions are favorable,” said Danielle Hale, chief economist at Realtor.com. “Another key barrier is the inventory ‘chicken-and-egg’ dilemma that may vex sellers who are also buying: Do you list now when home shoppers are hungry for more options, or do you wait for more inventory to hit the market in the spring?” Rising mortgage rates may also be keeping some potential sellers from making a move. The majority of homeowners with a mortgage now have a rate under 3%. The average on the 30-year fixed mortgage is now heading toward 4%. Current homeowners may not like the idea of paying more for the same debt they have now. As rates rise, they also lose purchasing power. Home prices continue to rise at a fast pace & in fact the gains in prices are still increasing. The expectation is that prices will cool as the number of sales drops. Homes are selling faster now, but fewer homes are selling, due to that short supply. Builders are also actively slowing sales of their own homes to make sure they can deliver them on time.
Homes are selling faster than ever before as the spring market approaches
Gold futures finished higher, with prices stretching their gains to a 4th-consecutive session to finish as the $ & Treasury yields eased back, boosting the appeal of the haven metal. The rise in the metal’s prices came as the $ pulled back, down 0.1%, as measured by the ICE US Dollar Index; & yields for the 10-year Treasury note were retreating to 1.92% after putting in the highest rate yesterday since Jul 2019. A weaker $, which precious metals tend to be priced in, & lower yields, usually helps to support buying in nonyielding commodities. Apr gold rose $8 (0.5%) to settle at $1836 an ounce, following a 0.3% rise yesterday, which marked the highest most-active contract settlement since Jan 26. Tomorrow's pivotal CPI inflation report should tilt market expectations into pricing in 4-6 Federal Reserve interest rate hikes this year.
Gold prices end higher as U.S. dollar and Treasury yields recede
Oil futures rose, with the US benchmark touching highs above $90 a barrel, after US gov data revealed weekly declines in crude & gasoline supplies. Traders also monitored talks aimed at returning Iran to an intl nuclear accord & kept an eye on the threat of a Russian invasion of Ukraine. West Texas Intermediate crude for Mar rose 26¢ to $89.62 a barrel after an intraday high at $90.58. Apr Brent crude, the global benchmark, added 68¢ (0.8%) to $91.46 a barrel. The Energy Information Administration (EIA) reported that US crude inventories fell by 4.8M barrels last week. The forecast was for an increase of 100K barrels. The American Petroleum Institute reported that US crude supplies fell by 2M barrels. The EIA data showed crude stocks at the Cushing, Okla, Nymex delivery hub fell by 2.8M barrels for the week. Total domestic petroleum production rose 100K barrels to 11.6M barrels per day. The US is participating indirectly in intl talks in Vienna aimed at restoring the Iran nuclear accord. The Trump administration pulled the US out of the agreement in 2018, renewing sanctions on Tehran that sharply curtailed the major oil producer's crude exports. Iran has subsequently breached major parts of the agreement. US & Iranian officials yesterday said a deal could be within reach, though the prospect of an agreement is stirring debate in DC. Lifting sanctions could see Iran unleash 1M barrels a day or more of crude & condensate production within four to 6 month.
Oil prices end higher as EIA reports declines in U.S. crude and gasoline supplies
Dow Jones Industrials
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