Wall Street wakes up – POLITICO


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Wall Street is finally catching up with reality – MM has been insisting for weeks on the risks of the Delta variant of Covid-19 and the impact of the United States staying only about 49 percent fully vaccinated, well below what is necessary for herd immunity. The point is, many more unvaccinated people will die for no good reason and this will undoubtedly reduce consumer confidence at the same time inflation erodes wage gains.

Monday’s stock market slump is therefore no surprise. In fact, he arrived quite oddly late. And that kept overnight in Asia, via Reuters: “Asian stocks were down early on Tuesday, as growing fears that the spread of the Delta variant of the coronavirus would hurt the global economic recovery sharply slipped riskier assets, including oil. …

“Japan’s Nikkei 225 hit a six-month low at the start of trading and widened losses to 1.05%. The Hang Seng index opened 0.3% lower and the Chinese benchmark CSI300 slipped 0.7% to start. … “The markets are clearly in risk mode,” said Edison Pun, senior market analyst at Saxo Markets, adding that Wall Street’s uptrend is weakening.

Oh and infrastructure spending is always a mess – Via our Burgess Everett and Marianne LeVine: “The Republicans in the Senate have revolted … against the opening of the debate on infrastructure while a bipartisan bill is still being drafted, lining up against a squeeze play of the majority leader. Chuck schumer.

“Schumer and Senate Democrats need at least 10 Republicans to agree to push forward an as yet unwritten deal to spend nearly $ 600 billion on roads, bridges and broadband in a vote scheduled for Wednesday . But Republican leaders and GOP lawmakers working on the bipartisan infrastructure package have carried the same warning to Schumer. ”

Which means … Democrats could just lean on the smaller bipartisan deal and pour the roughly $ 600 billion into the unilateral reconciliation bill that can bring up to $ 3.5 trillion. But keeping all Democrats in line on this one (which is really what the White House and Schumer are concerned about) isn’t a certainty.

So to paint a picture … Delta variant threatens economic rebound; inflation is about to force the hand of the Fed; and further fiscal stimulus remains in question (and could prove to be even more inflationary if passed). The economy continues to rebound. And all of this could turn out well. But it’s also a bit on the edge at the moment.

GOOD TUESDAY MORNING – Write to me on [email protected] and follow me on Twitter @morning money. Email Aubree Eliza Weaver on [email protected] and follow her on Twitter @AubreeEWeaver.

House Financial Services has a housing hearing at 10:00 am with HUD Secretary Marcia L. Fudge… hearing at 10:00 a.m. on “21st Century Communities: Climate Change, Resilience and Reinsurance”… Senate Banking Subcommittee has a hearing at 2:30 p.m. on federally assisted housing… President Biden has a Cabinet meeting at 3:15 pm to mark his first six months in office…

BIPARTISAN TOP DEM RIPS INFRASTRUCTURE CASE – Nos. Heather Caygle, Sarah Ferris and Nicholas Wu: “Senior House Democrat burned bipartisan Senate infrastructure negotiations at private conference … saying he hopes talks fail 48 hours before a vote much publicized test in the upper house.

“Representative. Peter DeFazio (D-Ore.), Who heads the House transport committee, trashed the bipartisan measure negotiated by the GOP in a fiery appeal with other Democrats, according to three sources during the call. “Crashing everything is probably the best thing,” DeFazio said when calling the Senate talks, which have… Biden’s approval. DeFazio’s frustrations were echoed by several other members during the call.

DELTA CHANGES THE EQUATION – Mohamed A. El-Erian on Bloomberg Opinion: “The surge of the delta variant of Covid-19 around the world raises concerns about the robustness of what has already been an uneven and uncertain global economic recovery…

“Let’s start with the two points that most people agree on: first, that the delta variant is much more contagious than previous iterations; and second, that the link between infections, hospitalizations and deaths has thankfully been weakened … We also know that the risk of new variants will persist if the world continues with what has been a sequential and uncorrelated approach to the fight against Covid ”

NEW TO THE TREASURE – Via Ed Mills by Raymond James: “[T]The Biden administration announced the appointment of Graham Steele as Deputy Secretary for Financial Institutions at the Treasury Department, a powerful role that is the latest signal of a gradual policy change in banking, asset management and housing policy.

“Steele can be seen as a powerful progressive ally in financial regulation and has advocated the aggressive use of a wide range of regulatory tools to reduce the size and market power of financial firms. ”

EQUITIES tumble as virus fears to shake markets – Stan Choe, Alex Veiga and Damian J. Troise of AP: “Concerns over the resurgence of a pandemic caused Wall Street shares in Tokyo to fall on Monday, fueled by fears that a variant of the virus would spread faster could upset the strong recovery of the economy.

“The S&P 500 fell 68.67, or 1.6%, to 4,258.49, after setting a record a week earlier. Another sign of concern, the 10-year Treasury yield hit its lowest level in five months as investors scrambled to find safer places to put their money.

‘MANY VERY YOUNG PEOPLE’ WILL BUY DECREASING STOCKS – Vildana Hajric and Claire Ballentine of Bloomberg: “One day the post-pandemic equity rally is going to end. When that happens, it will take a lot of newly baptized stock bulls.

“Their refusal to fold has been the signature of the stock market for at least 12 months, placing a floor under four more massive sell-offs in 2021 alone that look like the one that has cut nearly 3% from the S&P 500 since Thursday. The question of whether the dedication of retail investors is enough to turn the tide is the biggest question in the markets right now. ”

AS STABLECOINS EXPLODE IN POPULARITY, REGULATORS PREPARE A RESPONSE – NYT’s Jeanna Smialek: “Leading U.S. financial regulators met on Monday to discuss stablecoins, asset-backed digital currencies that are exploding in popularity so quickly the government is struggling to keep up – and that economic officials consider increasingly as a risk to financial stability.

“Stables are cryptocurrencies that derive their value from an underlying currency or basket of assets, and they have long been a unique concern. When news broke in 2018 and 2019 that Facebook was planning to create a stablecoin, the Federal Reserve and other regulators took note, fearing the project could quickly gain momentum. ”

Yellen urges US to move quickly to stablecoin rules – Reuters’ Pete Schroeder: “Treasury Secretary Janet Yellen told regulators on Monday that the US government must act quickly to establish a regulatory framework for stablecoins, a rapidly growing class of digital currencies. A group of U.S. regulators plan to issue recommendations in the coming months to address regulatory loopholes around stablecoins, the Treasury Department said in a statement.

REGULATORS SEEK TO FIX THE FUNDS THAT HAVE FALLEN IN THE LATEST CRISES – Paul J. Davies of the WSJ: “The onset of the Covid-19 pandemic has brought a familiar wave of stress to money market funds, which businesses and consumers use like checking accounts to store their cash. The Federal Reserve had to intervene to keep these funds operational. It was a malfunction that was not meant to happen. Several rounds of reforms around the world were aimed at strengthening money market funds after their collapse during the 2008 financial crisis.

“Now the Financial Stability Board, which brings together regulators from around the world, has proposed yet another round of changes in an attempt to minimize the likelihood that central banks will have to step in and support markets.”

ROBINHOOD SEES A VALUATION OF UP TO $ 35B – AP’s Michelle Chapman: “Robinhood, the online brokerage firm that got embroiled in this year’s meme stock market phenomenon, will go public next week looking for a market valuation of up to $ 35 billion.” . The company said in a regulatory filing Monday that it hopes to price 55 million shares in its initial public offering in a range of $ 38 to $ 42 per share. It could raise around $ 2.3 billion if the shares are sold at the high end of the range. Robinhood offers approximately 52.4 million shares.

BIDEN SAYS INFLATION IS TEMPORARY – Steve Holland and Andrea Shalal of Reuters: US President Joe Biden said on Monday that a price increase must be temporary, but his administration understood that longer-term unchecked inflation would be a ‘real challenge’ for the economy. economy and remain vigilant. Biden said he recently told Federal Reserve Board Chairman Jerome Powell that the Fed is independent and should take whatever action it deems necessary to support a strong and lasting recovery. ”

OFFICIAL ARBITRATOR SAYS COVID RECESSION ENDED IN APRIL 2020 – Hannah Lang and Bryan Mena of the WSJ: “The United States officially emerged from a recession in April 2020, concluding an economic contraction due to a pandemic that lasted two months, making it the shortest on record.

“The National Bureau of Economic Research’s announcement Monday also marks April as the official start of economic recovery after the initial shock of the coronavirus pandemic last spring, which sparked numerous business and business closures. schools, a sharp drop in demand for services and a record loss of jobs.

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