After spending months arguing that the surge in pandemic inflation was largely due to "transitory" forces, Fed Chair Jerome Powell told Congress on Tuesday that it's "probably a good time to retire that word." Many have taken issue with the verbiage in recent months, given that Powell has acknowledged that inflation is proving more powerful and persistent than expected. As a result of the price pressures, the Fed is now considering a faster tapering to its asset purchase program, shifting gears to tighter monetary policy.

Can tapering be good for the markets? While stocks sank after the comments - with traders boosting bets on upcoming interest rate hikes - futures are already pointing to renewed gains this morning. Volatility may still be the name of the game, but if history is any guide, the Fed's "taper tantrum" of 2013 was followed by strong gains for equities, as traders bet the economy was healthy enough to stand on its own. Following Ben Bernanke's comments in May 2013, stocks fell 5.8% in the next month, but for the rest of that year, the market was up 17.5%.

"The old adage that markets hate uncertainty couldn't be more true, and it's going toe-to-toe with another well-known force, investors' love of dips," added Craig Erlam, senior market analyst at OANDA.

Testing, testing

Concerns about the Omicron variant have led the U.S. to tighten travel rules, requiring all air travelers entering the country to show a negative COVID-19 test performed within one day of departure. Currently, vaccinated international travelers can present a negative result obtained within three days. The new one-day testing requirement from the CDC would apply to U.S. citizens as well as foreign nationals.

Fresh volatility: "It feels a little bit like we are back to where we were a year ago and that's not a great prospect for the industry and beyond," said Deirdre Fulton, a partner at consultancy MIDAS Aviation.

Last week, the U.S. imposed travel restrictions that banned the arrival of foreign nationals who had been in any of eight southern African nations (where Omicron was first detected) in the past 14 days. The Biden administration is also weighing whether to require air travelers entering the U.S. to get another test within three to five days after arrival. Some 56 countries have already implemented travel measures to guard against Omicron, with Japan and Israel even barring all foreigners from entering their borders.

World Health Organization: "I well understand the concern of all countries to protect their citizens against a variant that we don't yet fully understand," Director-General Tedros Adhanom Ghebreyesus declared. "But I am equally concerned that several member states are introducing blunt, blanket measures that are not evidence-based or effective on their own, and which will only worsen inequities." The agency is still warning that people over 60 years of age - who are not fully vaccinated, do not have proof of previous COVID infection or those with underlying health conditions - should postpone travel given the "very high" risk posed by the Omicron variant.

Renewable renewal

The IEA is out with its latest Renewables Market Report, which forecasts the planet's renewable electricity capacity will jump to more than 4,800 GW by the year 2026, an increase of over 60% compared to levels in 2020. Note that capacity here represents the maximum amount of energy that installations can produce, not what they will necessarily generate. Renewables are even expected to account for almost 95% of the increase in global power capacity through 2026 despite the pandemic and surging inflation seen across the globe.

Excerpt: "We have revised up our forecast from a year earlier as stronger policy support and ambitious climate targets announced for COP26 outweigh the current record commodity prices that have increased the costs of building new wind and solar PV installations."

Nearly 290 GW of new renewable energy generation capacity has been installed around the world in 2020, and based on current trends, renewable energy generating capacity will exceed that of fossil fuels and nuclear energy combined by 2026. Interestingly enough, the world's biggest polluter has installed the most new renewable energy capacity this year. China is even expected to reach 1,200 GW of wind and solar capacity in 2026, four years earlier than its target of 2030, and ahead of the U.S., Europe and India.

Outlook: "The high commodity and energy prices we are seeing today pose new challenges for the renewable industry, but elevated fossil fuel prices also make renewables even more competitive," said IEA executive director Fatih Birol. Other headwinds include a "range of policy uncertainties and implementation challenges" like financing grid integration and social acceptance. Despite the predictions of rapid growth, the capacity additions would not be enough to meet the IEA's scenario for net-zero emissions by 2050, and would need to be "80% faster than in our accelerated case."

Fines or vaccine

A surge in new daily infections and the emergence of the Omicron variant is prompting Greece to institute mandatory vaccinations against coronavirus. Residents over 60 years old will be required to get jabbed, or face a monthly €100 ($114) fine beginning on Jan. 16. The penalty would be added to tax bills and the funds will be given to Greek hospitals fighting the pandemic.

Quote: "It is not a punishment. I would say it is a health fee," Greek Prime Minister Kyriakos Mitsotakis declared. "Experts estimate that the importance of the vaccine in a 70-year-old person is equivalent to 34 vaccinations of younger ones in terms of public health."

Over the summer, vaccination mandates were introduced for healthcare workers and firefighters in Greece, with those failing to comply being suspended from their jobs indefinitely without pay. The government has also ruled out imposing new lockdowns, making it all the more important that the public health system does not become overloaded (ICU occupancy is already near capacity nationwide). Greece's vaccination ratio in the "over 60" age group is around 83%, a figure comparable to levels in the American population.

Over in the U.S.: Some companies have imposed policies similar to Greece, like Delta (DAL), which hit unvaccinated employees with $200 monthly fine due to increased health insurance premiums. However, COVID vaccine mandates at the federal level haven't been as successful. On Tuesday, the Biden administration was blocked from enforcing two orders requiring millions of American workers to get vaccinated against COVID, while a workplace vaccine-or-testing mandate (for businesses with at least 100 employees) was temporarily blocked by a federal appeals court in early November.

Today's Markets

In Asia, Japan +0.4%. Hong Kong +0.8%. China +0.4%. India +1.1%.
In Europe, at midday, London +1.5%. Paris +1.6%. Frankfurt +1.7%.
Futures at 6:20, Dow +0.8%. S&P +1.1%. Nasdaq +1.4%. Crude +4.4% at $69.12. Gold +0.7% at $1789. Bitcoin -0.8% at $57247.
Ten-year Treasury Yield +5 bps to 1.49%

Today's Economic Calendar

7:00 MBA Mortgage Applications
8:15 ADP Jobs Report
9:45 PMI Manufacturing Index
10:00 ISM Manufacturing Index
10:00 Construction Spending
10:00 Powell testifies before the committee on financial services
10:30 EIA Petroleum Inventories
2:00 PM Fed's Beige Book

Companies reporting earnings today »

What else is happening...

Adobe says Americans spent almost $11B on Cyber Monday.

Not waiting for the U.S., Fidelity launches a Spot Bitcoin ETF in Canada.

Twitter (NYSE:TWTR) bans sharing of private media without permission.

Case-Shiller: Home price increases slow more than expected in September.

Fannie (OTCQB:FNMA), Freddie (OTCQB:FMCC) jump after FHFA raises mortgage limits.

Pfizer (NYSE:PFE) on track to post best monthly gain in nearly three decades.

FDA advisors recommend authorization of Merck (NYSE:MRK) COVID antiviral pill.

AT&T (NYSE:T) hits 12-year low after warning of slower industry growth.

GlobalFoundries (NASDAQ:GFS) rises on earnings beat in first public report.

Salesforce (NYSE:CRM) names new co-CEO; outlook disappoints.

Elon Musk warns SpaceX (SPACE) employees of 'risk of bankruptcy.'