Wall Street Breakfast: Powell's Patience

Powell's patience - Stocks are continuing their march higher following a predicted move by the Fed to wind down its pandemic-era bond purchases. The central bank will cut its monthly Treasury purchases by $10B and mortgage-backed securities by $5B, bringing an end to the program in mid-2022. Prior to the announcement, the Dow and S&P 500 were trending down, but picked up after the decision was announced and closed in positive territory.Markets still at records? Fed Chair Jerome Powell highlighted that tapering doesn't mean policymakers will hike interest rates any time soon. He also held to the belief that high inflation would prove "transitory," and would not likely require a rapid change in policy. An accompanying statement still hedged that risk, warning that supply chain imbalances have meant "sizable price increases in some sectors," though Fed will continue to be "patient" and "monetary policy will continue to provide strong support to the economic recovery.""This taper was probably the best telegraphed or advertised move in monetary policy history," explained Art Hogan, chief market strategist at National Securities Corporation. "It was more dovish than markets expected," added Mona Mahajan of Edward Jones. "Anytime there's a whiff of lower rates, we tend to get favorable market reactions."Outlook: Some central banks are getting more nervous about inflationary pressures. The Bank of England today is likely to become the first leading central bank to tighten policy in the "post-pandemic" era, with money markets predicting an at least 15 basis point move higher. The BOE last raised its official rate in August 2018, but cut it to an all-time low of 0.1% at the start of the coronavirus crisis.

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Top News Powell's patience Shutterstock Stocks are continuing their march higher following a predicted move by the Fed to wind down its pandemic-era bond purchases. The central bank will cut its monthly Treasury purchases by $10B and mortgage-backed securities by $5B, bringing an end to the program in mid-2022. Prior to the announcement, the Dow and S&P 500 were trending down, but picked up after the decision was announced and closed in positive territory. Markets still at records? Fed Chair Jerome Powell highlighted that tapering doesn't mean policymakers will hike interest rates any time soon. He also held to the belief that high inflation would prove "transitory," and would not likely require a rapid change in policy. An accompanying statement still hedged that risk, warning that supply chain imbalances have meant "sizable price increases in some sectors," though Fed will continue to be "patient" and "monetary policy will continue to provide strong support to the economic recovery." "This taper was probably the best telegraphed or advertised move in monetary policy history," explained Art Hogan, chief market strategist at National Securities Corporation. "It was more dovish than markets expected," added Mona Mahajan of Edward Jones. "Anytime there's a whiff of lower rates, we tend to get favorable market reactions." Outlook: Some central banks are getting more nervous about inflationary pressures. The Bank of England today is likely to become the first leading central bank to tighten policy in the "post-pandemic" era, with money markets predicting an at least 15 basis point move higher. The BOE last raised its official rate in August 2018, but cut it to an all-time low of 0.1% at the start of the coronavirus crisis.       Covid Campaign commences Some pediatrician's offices and hospitals began giving shots to children between the ages of 5 and 11 on Wednesday, a day after the CDC recommended the use of Pfizer-BioNTech's (PFE, BNTX) vaccine for the age group. Government officials expect the campaign to pick up in earnest next week, when many school-based clinics and pharmacies start inoculating children. The Biden administration has already procured 65M doses for kids, with nearly 28M children in that age bracket in the U.S. How does it work? Children aged 5-11 will get two shots of the vaccine three weeks apart from each other, but at a lower dosage and different packaging than used for adults. Kids that are even younger will have to wait longer. Pfizer has said results from a study on vaccines in children ages 6 months up to 5 years old could come during the fourth quarter of 2021. Health professionals point to the data, which shows that the vaccine helps prevent disease, and those that do catch COVID are less likely to suffer severe complications. Children also spread the virus and can be vectors for infection, while mental health and well-being is another area of focus. Others that are more hesitant about giving their kids the jab say that children are not likely to suffer severe illness and there might be some unknown long-term side effects. COVID also appears to be different than viruses like polio and measles, which if vaccinated against as a child, the body will recognize at a much later date (no need for annual or semi-annual boosters). Survey time: A poll from the Kaiser Family Foundation in September found that 34% of parents would vaccinate their 5-11-year-old kids if the vaccine was authorized by the FDA. Another 37% would "wait and see," 24% would "definitely not" and the last 7% would do so only if required. Federal scientists also estimate that as many as 40% of children aged 5 to 11 nationwide have already been infected with COVID-19.       Sponsored By Invesco QQQ How Invesco QQQ Can Fit into Your Portfolio For Investors looking for unique and differentiated options, consider becoming an agent of innovation with Invesco QQQ. Learn more. On The Move Meme mania Meme stocks are getting some love again as Bed Bath & Beyond (BBBY) and Avis Budget (CAR) remind retail investors of squeeze potential. Shares of BBBY finished the day up 15% on Wednesday as an accelerated share buyback plan and partnership with Kroger (KR) reignited retail interest in the heavily shorted stock. Meanwhile, shares of CAR skyrocketed over 105% on Tuesday, spurring a move in the Dow Transports (DJT) and sending the index up more than 2,000 points at one point. Other movement: It wasn't long before the usual suspects joined the rally, including GameStop (GME) and AMC (AMC). Both closed up 5% yesterday, while another meme favorite, BlackBerry (BB), rose as much as 8.5%. The movement is also not limited to dinging the shorts, but is also part of a recent trend into swarm trading. The tactic sees people pile into certain names - often only for a day (or hours) - ignoring fundamentals, technicals and other catalysts (except options activity perhaps). They ride the wave up until the last trader is left holding the bag, or keep holding (diamond hands) if the sentiment continues. Honorable mentions? Think back to the recent launch of the Trump SPAC, when DWAC surged from $10 to $131 over a session and a half, or Tesla's (TSLA) moonshot over $1T last week despite no contract with Hertz (OTCPK:HTZZ) for electric vehicles.       Energy Oil prices OPEC and its allies, a group collectively referred to as OPEC+, are unlikely to open the taps today as the world's top oil producers meet for their latest meeting. The program "is working well and there is no need to deviate from it," according to Angola Oil Minister Diamantino Pedro Azevedo, while Kuwait expressed additional sentiment that oil markets were "well-balanced." Policy set back in August saw OPEC+ gradually increase oil production by 400K barrels per day each month, though that format is facing increasing diplomatic pressure. Quote: "I do think that the idea that Russia and Saudi Arabia and other major producers are not going to pump more oil so people can have gasoline to get to and from work, for example, is not, is not, right," President Biden said Sunday at the G20 meeting in Rome. "On the surface, it seems like an irony, but the truth of the matter is, everyone knows that idea that we're going to be able to move to renewable energy overnight... it's just not rational." Oil prices have hit their highest levels since 2014 and that's not sitting well with the consumer. West Texas Intermediate (CL1:COM) is up more than 70% this year, while Brent crude (CO1:COM) has advanced more than 60%, and both are trading above $80 a barrel. It's also being felt at the pump, with American gasoline (XB1:COM) at seven-year highs.

Analyst commentary: "For now, we still expect to see OPEC+ members remain in favor of keeping oil markets tight, taking advantage of the elevated prices to improve fiscal accounts," said Edward Bell, senior director of market economics at Emirates NBD. Oil importers also can't do much to force OPEC's hand and the U.S. call for OPEC countries to pump more oil also contradicts its purported aim to lead globally in climate change policy. As a result, "we remain of the view that oil prices will stay high until the end of 2021 and likely bleed into the early parts of next year."

     

Today's Markets

In Asia, Japan +0.9%. Hong Kong +0.8%. China +0.8%. India closed.
In Europe, at midday, London flat. Paris +0.4%. Frankfurt +0.5%.
Futures at 6:20, Dow flat. S&P +0.2%. Nasdaq +0.5%. Crude +1.9% at $82.37. Gold +0.9% at $1779.70. Bitcoin -1.9% at $61925.
Ten-year Treasury Yield unchanged at 1.57%

Today's Economic Calendar

7:30 Challenger Job-Cut Report
8:30 Initial Jobless Claims
8:30 Goods and Services Trade
8:30 Productivity and Costs
10:30 EIA Natural Gas Inventory
1:50 PM Fed's Quarles Speech
4:30 PM Fed Balance Sheet

Companies reporting earnings today »

What else is happening...

Cathie Wood backtracks her steps on Zillow (NASDAQ:Z) and dumps shares.

Qualcomm (NASDAQ:QCOM) surges on strong holiday quarter demand outlook.

Roku (NASDAQ:ROKU) slides amid slower player sales, light Q4 guidance.

Deere (NYSE:DE) digs in, says rejected labor deal is 'best and final' offer.

MGM Resorts (NYSE:MGM) plans to sell Mirage casino in Las Vegas.

Fastly (NYSE:FSLY) shares climb 5% on strong revenue report and outlook.

Fisker (NYSE:FSR) on track for first vehicle launch at end of 2022.

Hertz (OTCPK:HTZZ) want to return to the Nasdaq, files secondary offering.

Trendy debut... Sneaker maker Allbirds (NASDAQ:BIRD) flies in IPO.

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