Federal Reserve: Support For Economy Staying in Place

Federal Reserve

The Federal Reserve says it will continue to keep the “punch bowl” full.

Top Federal Reserve officials continued a barnstorming effort on Thursday. The Federal Reserve officials are telling investors and the public that the Fed’s massive support for the economy will stay in place for a long time.

The Federal Reserve wants to see an accelerating recovery reaching all levels of American society before it pulls away its support.

In speaking of Federal Reserve policy, San Francisco Fed President Mary Daly said, “We are not going to take this punch bowl away.”

In market terms, the Fed is making its message clear. It will not listen to the bond market bears and their inflation fears.

The Federal Reserve wants to see actual progress on the ground. It wants the United States to continue to claw back lost jobs and economic output.

This is the right policy. There is a real danger the U.S. economy has a strong bounce for two to three quarters but then fades again into a no-growth path.

The Big News

Americans Still Wary of Covid

A growing number of Americans would feel safe resuming activities like  dining out or flying within a few weeks of their second dose of COVID-19 vaccine. But 25% to 30% would wait until the nation reaches herd immunity, according to a Harris Poll survey for USA TODAY. The sizable share of people who prefer to wait until at least 70% of the population is immune will mean the economic rebound will not kick in until late summer and fall.

Where the Vaccine Profits Go

Much of the revenues and profits from Covid-19 vaccines are flowing to companies behind the scenes. They are going to the contract manufacturers and clinical-trial organizers that move the shots from the lab to mass-produced reality. Contractors hired to test and manufacture the vaccines have enjoyed the profits without the same level of public scrutiny as the big pharmaceutical companies.

Airlines Most Bullish in a Year

Thursday saw airlines – United and Southwest – adding new flight routes and reviving old ones. It’s the latest sign that demand for leisure travel is picking up as the national vaccination rate moves higher. Over one million people were screened at airport security checkpoints each day over the past two weeks. A United executive said, “Over the past 12 months, this is the first time we are really feeling more bullish.”

Covid Variants Are Converging

Evidence is growing that Covid variants evolving around the world share similar combinations of mutations. In the U.S., evolutionary microbiologist Vaughn Cooper’s lab has found at least seven genetically independent lineages that acquired a mutation at one particular spot on the virus’s spike protein. Limiting infections will be key to reducing the virus’s opportunity to mutate in ways that make it even more dangerous. Cooper said, “These viral adaptations are already rewriting our biology textbooks on convergent evolution.”

The Future of Variant-Immune Vaccines

Exciting new data show that people infected with the South African variant develop immune responses that can fend off multiple variants. Now, scientists want to learn from people who recover from Covid-19 and make antibodies that, over time, become more capable of blocking a wide array of coronavirus variants.

The Coronavirus Numbers

Here are the numbers from Friday at 8 a.m. from Johns Hopkins University:

  • 125,594,898 Infected Worldwide
  • 489,654,792 Vaccines Given Globally
  • 2,757,093 Deaths
  • 30,079,974 Infected in the U.S.
  • 133,305,295 U.S. Vaccine Doses Administered
  • 546,825 Deaths in the U.S.

What’s Next

Stock indices are on the front foot this morning after a choppy week.

The bounce comes after shares on Wall Street staged a late rally yesterday that snapped a two-day losing streak. The S&P 500 closed up 0.5% at 3,909. The Dow Jones Industrial Average rose 200 points. US futures indicate Wall Street will open higher.

The Suez Canal remains blocked. Even if the giant ship is cleared, it could take weeks or months to sort out the mess. It’s another blow to the global economy.

One example of the mess can be seen at Caterpillar. It said it is facing shipment delays and may have to airlift crucial parts.

Watch yields again after another weak 7-year auction. The auction of $62 billion in 7-year notes took a yield of 1.3%. That was more than 10 basis points above February’s soft auction. The bid-to-cover of 2.23 was also low. The yield on the 10-year Treasury is back above 1.66% following the auction.

Yours in Health & Wealth,

Tony Daltorio

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