Markets saw more selling on tensions in the Russia-Ukraine crisis

Dow tumbled 622 (not far from session lows), decliners over advancers about 3-1 & NAZ tumbled 407.  The MLP index was off 1 to 201 & the REIT index fell 4+ to the 451s.  Junk bond funds dipped lower & Treasuries remained in very strong demand, reducing yields.  Oil dropped 2+ to the 91s & gold skyrocketed 31 to 1902 ( more on both below).

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Congress is staring down a potential gov shutdown beginning tomorrow night if it does not pass a temporary gov funding bill, as Senate Reps push for amendment votes that could complicate the formula for passage.  Those amendments include a potential balanced budget amendment backed by Sen Mike Braun & an amendment from Sen Mike Lee that aims to defund all federal vaccine mandates.  There are also reports that Sen Marco Rubio wants to force an amendment vote on a bill he introduced with Sen Joe Manchin this week, to bar federal funding from giving away crack pipes.  "Enough is enough. It’s time to stop the petty tyrants imposing COVID-19 vaccine mandates on families across the country. No child should be denied an education because of his or her personal medical choice," Sen Ted Cruz said of his amendment to bar federal funding from going to schools that mandate coronavirus vaccines for children.  Braun's office says there could be some Dem defectors for his amendment – which would be a statute, not a constitutional amendment.  It's functionally similar to a Dem-sponsored balanced budget amendment the Senate voted on in 2011 & to one proposed by Manchin in 2013.  A gov shutdown is widely not expected at this point, but things are still developing.  A source familiar with the talks said that it's not yet clear which amendments there will be votes on or what the threshold for the votes will be.  "Those issues are still being ironed out," the source added.

Senate faces high-stakes budget talks with government shutdown looming

St Louis Federal Reserve Pres James Bullard cautioned that without central bank action on interest rates, inflation could become an even more serious problem.  “We’re at more risk now than we’ve been in a generation that this could get out of control,” he said during a panel talk.  “One scenario would be ... a new surprise that hits us that we can’t anticipate right now, but we would have even more inflation. That’s the kind of situation that we want to ... make sure it doesn’t occur.”  Bullard has made news lately with his calls for aggressive Fed action.  He has advocated for a full percentage point in rate increases by Jul in an effort to stem price surges that are running at the fastest pace in 40 years.  In his remarks today, Bullard repeated his assertion that the Fed should “front-load” rate hikes as way to get ahead of inflation running at a 7.5% clip over the past year.  Fed officials had been resisting tightening policy, insisting for much of last year that the current run-up in prices was tied to pandemic-specific factors, such as clogged supply chains & outsized demand for goods over services & would fade over time.  “Overall, I’d say there’s been too much emphasis and too much mindshare devoted to the idea that inflation will dissipate at some point in the future,” Bullard added.  “We’re at risk that inflation won’t dissipate, and 2022 will be the second year in a row of quite high inflation. So that’s why given this situation, the Fed should move faster and more aggressively than we would have in other circumstances.”  The Fed has indicated it likely will start raising interest rates in Mar, which would be the first increase in more than 3 years.  After that, markets are looking for an additional 5 or 6 increases in 25 basis-point increments.  A basis point is equal to 0.01%.  Bullard said the upcoming change in policy shouldn't be viewed as an attempt to restrict the markets & the economy.  “It’s not tight policy. Don’t let anybody tell you it’s tight policy,” he said.  “It’s removal of accommodation that will signal that we take our responsibility seriously.”

Fed’s Bullard says inflation ‘could get out of control’ so action is needed now

Secretary of State Antony Blinken, in a dramatic appearance at the UN shared a grim assessment of what Russian forces could do to Ukraine if the Kremlin launched an invasion.  “We don’t know precisely how things will play out. But here’s what the world could expect to see unfold. In fact, it’s unfolding right now,” Blinken began in his address.  “Russian missiles and bombs will drop across Ukraine. Communications will be jammed, cyberattacks will shut down key Ukrainian institutions. After that, Russian tanks and soldiers will advance on key targets that have already been identified and mapped out in detailed plans. We believe these targets include Ukraine’s capital Kyiv, a city of 2.8 million people,” he continued.  Blinken, who embarked on a scheduled trip to Munich alongside VP Kamala Harris earlier today, flew instead to New York at the request of Ambassador to the United Nations Linda Thomas-Greenfield.  Thomas-Greenfield told reporters that she requested Blinken address the intl forum because the drumbeat of war was sounding louder.  “Our goal is to convey the gravity of the situation. The evidence on the ground is that Russia is moving toward an imminent invasion. This is a crucial moment,” Thomas-Greenfield said, adding that Blinken would “make it clear to the world that we are doing everything, everything we can to prevent a war.”

Blinken makes dramatic bid at UN to prevent Russian invasion of Ukraine

The Centers for Disease Control & Prevention (CDC) is reviewing its mask guidance, shifting its focus to Covid hospitalizations as a key measure of the severity of the outbreak & future guide for determining whether health safety protocols need to be tightened, according to the agency's director, Dr Rochelle Walensky.  “We must consider hospital capacity as an additional important barometer,” Walensky said during a White House Covid update.  “We want to give people a break from things like mask-wearing when these metrics are better, and then have the ability to reach for them again should things worsen,” she said.  The CDC currently recommends that people wear masks in indoor public places regardless of their vaccination status if they live in an area with high viral transmission.  Nearly every county in the US has high transmission right now, according to CDC data.  People are required by federal law to wear masks on planes, buses, trains & other forms of public transportation.  However, states have started easing public health measures as new infections from the omicron variant rapidly decline from their peak levels in Jan.  New York & California have dropped mask mandates for businesses, while New Jersey has also gotten rid of its mask requirement for schools.  Jeff Zients, White House Covid response coordinator, said the Biden administration is closely coordinating with state governors, public health experts & business leaders as the federal gov plans for what the Covid reaction will look like as the wave of infection from the omicron variant subsides.

CDC expected to update mask guidance as early as next week

Gold futures jumped to settle above $1900 an ounce for the first time since Jun, as a flare-up in tensions between Russia & Ukraine renewed concerns about a wider military conflict.  Against that backdrop, gold for Apr rose $30 (1.6%) to settle at $1902 an ounce.  That marked the highest settlement for the most-active contract since Jun 2, 2021. Officials supporting Russia in the Donbas region have accused Ukraine's armed forces of launching grenades & mortar attacks into the Russia-backed region, which would be a breach of cease-fire agreements.  The accusations come as Moscow has been seen continuing to build up troops along the Ukraine border, despite claiming that it is withdrawing forces, according to US intelligence.  Gold has been reacting to the geopolitical tensions in Eastern Europe, as well as evidence that inflation is surging in many parts of the world in the aftershocks from the COVID-19 pandemic.  Overall, however, the upside for gold has been somewhat limited by concerns about central banks plans to raise interest rates to combat high inflation.  The minutes released yesterday from the Federal Reserves Jan policy meeting, however, didn't imply that the central bank was adopting a more hawkish stance than investors have already anticipated.

Gold settles above $1,900, buoyed by a mix of ‘cold war and hot inflation

Oil futures ended lower, pressured by signs of progress toward restoring a nuclear agreement with Iran that may bring more oil to the world market.  Some support for prices remained, however, as traders continued to weigh the potential for a Russian invasion of Ukraine, which may lead to disruptions in global energy supplies. West Texas Intermediate (WTI)  crude for Mar fell $1.90 (2%) to settle at $91.76 a barrel.  Apr Brent crude lost $1.84 (1.9%) at $92.97 a barrel.  Both WTI & Brent ended Mon at their highest since 2014.  Oil futures ended lower today, pressured by signs of progress toward restoring a nuclear agreement with Iran that may bring more oil to the world market.  Some support for prices remained, however, as traders continued to weigh the potential for a Russian invasion of Ukraine, which may lead to disruptions in global energy supplies.  Oil futures temporarily trimmed a decline after the US envoy to the UN was quoted as saying that there was evidence on the ground that Russia was preparing for an “imminent invasion” of Ukraine.  Russia earlier this week said it was withdrawing troops from near the Ukraine border.  But NATO & US officials said that Russia instead increased its forces near Ukraine by 7000 troops.  Oil fell yesterday after a report said that Iran's top nuclear negotiator, Ali Bagheri Kani tweeted that after weeks of intensive talks “we are closer than ever to an agreement.”  If the 2015 agreement with Iran is revived & economic sanctions are lifted, Iran may resume oil exports.

Oil ends lower on progress in Iran nuclear talks, but traders keep an eye on Ukraine crisis

Stocks were under pressure all day on the possibility of a war in eastern Europe.  Blinkin's speech at the UN underscored the seriousness of the crisis.  As usual,in times like these investors sell stock to buy gold & Treasuries.  The Dow is back to where it was in May (see below).  This is a very scary time for investors!!

Dow Jones Industrials