Dow retreated 518 (down about 300 in just the last 2 hours), decliners over advancers 4-1 & NAZ tumbled 538. The MLP index slid lower the 204s & the REIT index fell 5+ to the 469s. Junk bond funds remained weak & Treasuries continued to be sold, taking the yield on the 10 year Treasury up 6 basis points to 1.83%. Oil rose 1+ taking it over 90 for the first time in 7 years & gold was off 3 to 1807 (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)
US oil crossed above $90 for the first time since 2014 as demand for petroleum products surges while supply remains constrained. West Texas Intermediate crude futures, the US oil benchmark, gained more than 2% to trade as high as $90.23 per barrel. The last time prices were above the $90 mark was 2014. Intl benchmark Brent crude rose 1.7% to trade at $91. Brent topped $90 on Jan 26. Oil's had a blistering rally since falling to record lows in Apr 2020 — WTI briefly traded in negative territory — as demand has returned but producers have kept supply in check. WTI is up nearly 20% for the year, building on 2021's more than 50% gain. As oil prices push higher, a number of analysts have forecast $100 oil. Yesterday OPEC & its oil-producing allies (OPEC+) decided to stick to a previously announced schedule & increase Mar production by 400K barrels per day. The move comes as the group has faced pressure, including from the US, to boost output in an effort to alleviate the rapid appreciation in oil prices.
U.S. oil prices top $90 a barrel for the first time since 2014
The stunning jump in home values over the course of the Covid-19 pandemic has given US homeowners record amounts of housing wealth. What they choose to do with it could have impacts on the broader economy. Annual home price gains averaged 15% in 2021, up from 6% in 2020, according to CoreLogic. Strong pandemic-driven demand, record low supply & record low mortgage rates conspired to create those hefty gains. Bidding wars are now the norm, and desperate buyers are competing with investors who want to cash in on the hot market. The upward trend is continuing, despite winter being historically the slowest season for housing. “While we expect this year’s buyers will eventually see some relief from the 2021 frenzy, home shoppers continue to face challenging conditions in the early days of 2022,” said Danielle Hale, chief economist for Realtor.com. “In fact, last week’s home price and time on market trends suggest competition intensified.” While there were relatively few home sellers in 2021, for those who did list their homes, the returns were well worth it. The profit on a typical home sale last year was just over $94K according to ATTOM, a national property database. That is up 45% from the profit in 2020 & up 71% from pre-pandemic profits. And the vast majority of local housing markets participated in that growth. “Households that escaped job losses from the pandemic dove into the market, in large part as a response to the crisis,” said Todd Teta, chief product officer at ATTOM. “No doubt, there are warning signs that the surge could slow down this year. But 2021 will go down as one of the greatest years for sellers and one of the toughest for buyers.” It was the highest profit level since 2008, which was the last housing boom & that boom was built on faulty mortgages & homeowners with little to no equity. That is not the case now. Even homeowners who weren’t listing their properties for sale were gaining equity. About 42% of homeowners were considered equity-rich at the end of last year, meaning their mortgages were ½ or less than ½ the value of their home . That wealth is far higher than the 30% share of equity-rich homeowners at the end of 2020. The amount of tappable equity (equity above the 20% usually required by lenders to back a mortgage) grew by $2.6T last year to a record total of $9.9T, according to an exclusive advance look at Black Knight's Mortgage Monitor. That is a 35% jump in a single year. The average homeowner now has $185K in tappable equity. So what does that mean for the overall economy? A lot of potential spending power, should consumers decide to use all that wealth. The personal savings rate shot up during the pandemic, according to the Bureau of Economic Analysis & is only now starting to come back to pre-pandemic levels. The only thing that might stand in the way of some homeowners tapping all that wealth, outside of selling their homes, is rising mortgage rates. They might not want to do a cash-out refinance because they'd likely have to pay a higher rate. A home equity line of credit is a possibility, but interest rates on those are rising as well.
Housing wealth is setting new records for both owners and sellers
One of the great mysteries that has emerged from the Covid-19 pandemic — & one that's still being investigated by infectious disease specialists — is why some people catch Covid & others don't, even when they’re equally exposed to the virus. Many of us know entire households who caught Covid had to isolate over the pandemic, but there are also multiple anecdotes of couples, families & colleagues where some people caught the virus — but not everyone. Indeed, Danny Altmann, professor of immunology at Imperial College London, said that studies indicate the likelihood of becoming infected within a household once one case is positive is “not as high as you’d imagine.” An increasing amount of research is being devoted to the reasons why some people never seem to get Covid — a never Covid cohort. Last month, new research was published by Imperial College London suggesting that people with higher levels of T cells (a type of cell in the immune system) from common cold coronaviruses were less likely to become infected with SARS-CoV-2, the virus that causes Covid-19. Dr Rhia Kundu, first author of the study from Imperial's National Heart & Lung Institute, said that “being exposed to the SARS-CoV-2 virus doesn’t always result in infection, and we’ve been keen to understand why.” “We found that high levels of pre-existing T cells, created by the body when infected with other human coronaviruses like the common cold, can protect against Covid-19 infection,” she said. However Kundu also cautioned that, “while this is an important discovery, it is only one form of protection, and I would stress that no one should rely on this alone. Instead, the best way to protect yourself against Covid-19 is to be fully vaccinated, including getting your booster dose.” Andrew Freedman, an academic in infectious diseases at Cardiff University Medical School, said that why some people get Covid & others don't “is a well recognized phenomenon and presumably relates to immunity from vaccination, previous infection or both.” “We know that many people have still caught (mostly mild) omicron infection despite being full vaccinated, including [having had] a booster. However, vaccination does still reduce the chance of catching omicron and responses do vary from person to person. So some people catch it and others don’t despite very significant exposure,” he added.
Why do some people get Covid when others don’t? Here’s what we know so far
49 Reps signed a letter pledging to shut down the gov over federal vaccine mandates. The letter was was formally sent to Senate Minority Leader Mitch McConnell & House Minority Leader Kevin McCarthy yesterday. The letter tells the leaders that their party is reaching another crossroads where they "must once again decide whether they will vote to fund a federal government that is enforcing tyrannical COVID-19 vaccine mandates on the American people." The lawmakers took aim at the "myriad municipalities and states that directly benefit of federal funding" as a result of the vaccine orders, including in DC. They also pointed out that the Biden administration has "unilaterally imposed" 5 COVID-19 vaccine mandates, referring to the mandates on medical workers, the military, federal employees & federal gov contractors. The Occupational Safety & Health Administration (OSHA) rule, that businesses with at least 100 employees must require workers to get vaccinated or get tested weekly and wear a mask, was struck down by the Supreme Court at the beginning of Jan. The court ruled that OSHA lacked the authority to impose such a mandate because the law that created OSHA "empowers the Secretary to set workplace safety standards, not broad public health measures." "Congressional Reps cannot continue to abdicate their Article I duties in hopes the judicial branch will rule in favor of the American people," the GOP lawmakers wrote. "Therefore, we the undersigned refuse to consider supporting any federal government funding vehicle, be it a continuing resolution or an omnibus appropriations measure, that funds the enforcement of COVID-19 vaccine mandates at any level of government," they continued.
Republicans threaten government shutdown over funding of vax mandates
Gold futures ended lower for the first time in 4 sessions, but held ground above the key $1800 mark, as investors looked to monthly US jobs data tomorrow to help guide the next move for the metal's prices. Apr gold fell by $6 to settle at $1804 an ounce. Prices pulled back after gaining 0.5% yesterday, which saw the highest settlement for a most-active contract since Jan 26. Bullion had posted gains in each of the past 3 sessions. Prices for both precious metals extended their declines as the ICE US Dollar index fell but Treasury yields strengthened in the wake of the latest US economic data. The ISM US service sector activity index fell to a 16-month low of 59.9% in Jan. The index was forecast to decline to 60%. The move in gold came as the Bank of England today announced its 2nd consecutive interest-rate increase, marking the first time it is completed back-to-back hikes since 2004. The central bank also said it would stop reinvesting the proceeds of its portfolio of £875B in gov bonds, but won't begin selling them until rates have climbed to at least 1%. That decision came ahead of a policy update from the ECB, where the institution held its policy mix in place but reaffirmed plans to scaling back its bond buying program soon. Last week, the Federal Reserve signaled that it could start lifting benchmark interest rates as soon as Mar & continue to raise rates as it combats inflation pressures.
Gold prices post first loss in 4 sessions, but hold above the key $1,800 mark
Oil futures rallied, with the US benchmark settling above $90 a barrel for the first time in more than 7 years, buoyed by risks to US & global crude supplies. West Texas Intermediate crude for Mar climbed by $2.01 (2.3%) to settle at $90.72 a barrel — the highest front-month contract finish since Oct 6, 2014. Apr Brent crude, the global benchmark, added $1.64 (1.8%) at $91.11 a barrel. That was still a few ¢ below the Jan 31 settlement at $91.21, which was the highest since Oct 2014. The move for oil came a day after OPEC+ stuck with a plan to boost production by another 400K barrels a day in Mar. Oil prices had been trading lower today before a mid-session turnaround. Several OPEC+ representatives appeared to tie the recent rise in prices to tensions between Russia, a member of the group & Ukraine.
U.S. oil futures settle above $90 for the first time since 2014
Dow Jones Industrials
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