Week of Oct 1, 2021 Weekly Recap & The Week Ahead
“The mood swings of the securities markets resemble the movement of a pendulum. Although the midpoint of its arc best describes the location of the pendulum “on average,” it actually spends very little of its time there. Instead, it is almost always swinging toward or away from the extremes of its arc. But whenever the pendulum is near either extreme, it is inevitable that it will move back toward the midpoint sooner or later. In fact, it is the movement toward an extreme itself that supplies the energy for the swing back. Investment markets make the same pendulum-like swing: between euphoria and depression, between celebrating positive developments and obsessing over negatives, and thus between being overpriced and underpriced. This oscillation is one of the most dependable features of the investment world, and investor psychology seems to spend much more time at the extremes than it does at a “happy medium.” ― Howard Marks
1. Yellen Warns Congress of Cash Supply Running Out Around Oct. 18 — Treasury Secretary Janet Yellen warned that her department will effectively run out of cash around Oct. 18 unless legislative action is taken to suspend or increase the federal debt limit, putting pressure on lawmakers to avert a default on U.S. obligations. Republican lawmakers have used the debt-limit debate to help them portray Biden’s proposed fiscal expansion — spanning expanded child tax credits, paid family leave and new benefits for Medicare recipients — as out-of-control government spending. An eventual Democrat-only vote to raise the debt limit would provide fodder for election attack ads.
2. Congress Clears Government Funding Bill to Avert Shutdown — The House passed a nine-week spending bill to avert a U.S. government shutdown hours before it was set to begin on an 254 to 175 vote. The legislation passed the Senate earlier Thursday and now heads to President Joe Biden’s desk.
The bill passed both chambers after Democrats dropped an earlier attempt to attach a debt-ceiling suspension to the bill in face of implacable Republican opposition to that measure. GOP senators blocked a version of the bill containing the debt ceiling language on Monday.
The federal government would be kept open through Dec. 3 under the legislation. The bill also contains $28.6 billion for states recovering from hurricanes and wildfires as well as $6.3 billion to resettle refugees from the U.S. war in Afghanistan.
3. Moderna Is Likely to Get FDA Approval for Smaller Booster — the Food and Drug Administration is likely to authorize a booster dose of Moderna ‘s Covid-19 vaccine, and will do so at a dose level that is half as large as what was used for the prime doses, according to a report out late Tuesday from Bloomberg.
It isn’t yet clear when the FDA might issue the authorization, according to Bloomberg. The FDA’s vaccines advisory committee, which may be asked to weigh in on the booster, is scheduled to meet on Thursday, but the meeting’s agenda doesn’t include a discussion of Covid-19 vaccine boosters. The committee isn’t currently scheduled to meet again this year.
The Centers for Disease Control and Prevention vaccines advisory committee, which will also likely consider the Moderna booster, is scheduled to meet again on Oct. 20.
4. Merck Pill Intended to Treat Covid-19 Succeeds in Key Study — the pill cut the risk of hospitalization or death in study subjects with mild to moderate Covid-19 by about 50%, the companies said reported. The drug, called molnupiravir, was performing so well in its late-stage trial that Merck and Ridgeback said they stopped enrolling subjects after discussions with the U.S. Food and Drug Administration. The results put molnupiravir on track to potentially be authorized by the end of the year and to finally provide an option for doctors who have spent the pandemic seeking a drug that infected people could easily take at home to prevent them from becoming hospitalized.
5. Biden Signs Government Funding Bill to Avert a Shutdown — President Joe Biden on Thursday signed a nine-week stopgap funding bill that averts a government shutdown but fails to resolve the threat of a U.S. default linked to the debt limit. The legislation was hastily passed by both chambers of Congress earlier in the day, and keeps funding levels for government departments and agencies flat until Dec. 3. Had it not been approved, parts of the U.S. government would have begun suspending operations on Friday.
The measure, however, doesn’t include a provision sought by Democrats to suspend the nation’s debt limit, after Republicans in the Senate blocked a version of the bill that included the debt provision. Treasury Secretary Janet Yellen has said that if lawmakers fail to raise the debt limit by about Oct. 18, the government may not be able to pay its bills, posing a dire risk to the U.S. economy.
The week ahead — Economic data from Econoday.com:
