Read: Congressional leaders reach deal to raise debt limit, likely averting default

If Thursday’s vote clears the Senate, Congress would have to vote later on a separate bill lifting the borrowing limit, including a dollar amount. That measure would be able to pass since Democrats control the Senate with 50 members, and Vice President Kamala Harris may cast tie-breaking votes.

Treasury Secretary Janet Yellen has urged lawmakers to act by Dec. 15. The votes come amid sparring over President Joe Biden’s massive social-spending plan, and Republicans are eager to paint Democrats as fiscally irresponsible as next year’s midterm elections loom.

Democrats “want to create even more inflation on their own. So, as Republicans have made clear for months, they will have to own a debt ceiling increase as well,” McConnell said on Wednesday.

Senate Majority Leader Chuck Schumer, a New York Democrat, says his party wants to pass the debt-limit increase “to pay the debts we have already incurred, just like any household must do.” Schumer and McConnell had weeks of talks over the debt-limit deal.

Democrats plan to pay for Biden’s “Build Back Better” plan, meanwhile, through a new corporate minimum tax and raising taxes on high-income Americans.

U.S. stock indexes
SPX,
-0.38%
on Thursday traded modestly lower, despite a better-than expected report on those seeking unemployment benefits insurance, which carved out a new pandemic-era low. 

“Going forward, the path that rates take will be directly impacted by more information about the omicron variant as it is revealed and the overall trajectory of the pandemic,” said Sam Khater, chief economist at Freddie Mac, in this week’s report. “In the meantime, rates remain low and stable, even as the nation faces declining housing affordability and low inventory.”

Long-term bond yields, including the 10-year Treasury note
TMUBMUSD10Y,
1.477%,
fluctuated over the past week, responding to mixed signals on the labor market and positive indications regarding the effectiveness of certain treatments to the latest strain of the virus that causes COVID-19.

The variant isn’t the only factor that’s set to influence interest rates in the near future. The latest edition of the consumer price index will be released Friday, which will provide insight as to the pace of inflation. That could influence central bankers when the Federal Reserve meets next week. That meeting could determine how quickly the Fed tapers its asset-purchasing activities and hikes short-term interest rates.

“With markets now anticipating the Federal Reserve to be more hawkish in fighting inflation, expectations for accelerated bond purchase tapering and rate hikes are beginning to be priced into rates markets,” said Paul Thomas, vice president of capital markets at Zillow
Z,
-1.92%

ZG,
-2.42%.

The latest data on mortgage applications suggests that the pace of home sales remains strong, even in spite of growing affordability challenges. Whether that trend will continue into 2022 will depend on how robustly interest rates respond to changes in the country’s fiscal policy.

The U.S. reported the first case of omicron last week, in a fully vaccinated individual who had recently traveled to South Africa. 

The new variant, which was first detected in South Africa, is thought to be more infectious; however, it’s unclear if it causes more severe disease. A study in Japan showed that the omicron variant was 4.2 times more contagious than the delta strain, according to a Bloomberg report on Thursday.

Meanwhile, as overall number of cases rise, some hospitals in the U.S. are already struggling to meet the demand from COVID-19 patients.

Geisinger, a large hospital system in Pennsylvania, said it ran out of beds and patients are waiting between 10 and 20 hours in the emergency room to receive care, according to Newsweek. Michigan Medicine, a hospital in Ann Arbor, is canceling elective surgeries as its hospital beds fill up with COVID-19 patients. Vermont’s hospitalizations are at a record high.

That said, there are some new regulatory changes underway.

The FDA on Wednesday authorized the first therapy that can be used for pre-exposure prophylaxis, and the infusions may be used for some people who may not be able to gain protective antibodies through COVID-19 vaccination. AstraZeneca’s
AZN,
+0.81%

AZN,
+1.12%
COVID-19 monoclonal antibodies can be prescribed for some individuals who are immunocompromised or have a history of severe adverse reactions to a COVID-19 vaccine.

The regulator is also expected to authorize BioNTech SE
BNTX,
+0.76%
and Pfizer Inc.’s
PFE,
+2.45%
COVID-19 booster for 16 and 17-year-olds, after telling Bloomberg that it does not plan to hold an advisory committee meeting to discuss authorization of a booster in this age group.

Here’s what else you should know about COVID-19

The virus apparently attacks fat tissue, in addition to immune cells located within fat cells, according to a preprint reported on by the New York Times. “This could well be contributing to severe disease,” Dr. Catherine Blish, one of the report’s authors, told the Times. 

Health experts say that they have doubts about CDC data that says 99.9% of seniors in the U.S. have had at least one dose of a COVID-19 vaccine, reports Kaiser Health News. They say that the data doesn’t match what some states are saying and what’s been reported in polls.  

The latest COVID-19 numbers

The daily average case count in the U.S. rose to 121,311 on Wednesday, the highest since Sept. 24 and a 27% increase from two weeks ago, according to the New York Times tracker. The daily average death toll is down 1,275, from 1,298, on Tuesday, but is up 12% from a week ago, while hospitalizations increased 20%, to an eight-week high of 61,936.

More than 200 million people in the U.S. are now fully vaccinated, according to the CDC. That’s 60.4% of the population. About 48.9 million people, which is one quarter of the U.S. population, has received a booster dose.

The World Health Organization said weekly COVID-19 cases continue to plateau worldwide but are increasing in Africa (by 79%) and the Americas (by 21%).

One reason U.S. inflation might be hotter than the rest of the world is how countries decided to help their workers in the early days of the pandemic.

The U.S. mostly relied on generous unemployment benefits and direct stimulus checks, while Europe and Japan, by contrast, mostly relied on furlough programs.

Hyun Song Shin, economic adviser and head of research at the Bank for International Settlements, finds that in some respects, the differing strategies got the jobs market back to similar places. Since the fourth quarter of 2019, the change in hours worked followed similar paths.

But the composition was far different. In the U.S., the rise in average hours worked was mostly due to lower unemployment, as well as a pickup in participation in the jobs market. In other developed markets, Shin found, the rise in average hours worked reflects workers taking on more hours at the same companies where they were previously employed.

Europe and Japan have not confronted the same issues the U.S. has found with a surge in job openings. “Preserving the employment relationship appears to have kept the economy on a path where the recovery is closer to bringing the economy to its pre-pandemic state, at least in terms of the Beveridge curve relationship,” said Shin, who previously was an economics professor at Princeton University. The Beveridge curve refers to the relationship between job openings and unemployment.

The U.K., he concedes, is one place that did rely on furlough programs but also has seen a rise in job vacancies. But in most advanced economies, average wage growth is more or less in line with pre-pandemic trends, or a little below. “It is notable, however, that in the United States, where labor market changes are most apparent, wage growth has picked up despite labor market conditions that appear weaker than before the pandemic,” he said.

And that’s why he suggests the U.S. might be facing an inflation problem longer than other economies.

“The key to gauging where global inflation is headed is in the labor market, and whether the reduced efficiency of matches exhibited in the Beveridge curves of some economies translates into a more sustained wage-price spiral. In this respect, longer-term structural issues are more important in understanding the current state of the global economy, especially when we consider future inflation developments,” he said.

British Prime Minister Boris Johnson on Wednesday announced COVID-19 passes would be mandatory for entry into nightclubs or large venues and urged individuals to once again work from home. The government has warned of cases doubling every two or three days.

Sven Jari Stehn, economist at Goldman Sachs, said in a note on Wednesday that given that new information on the omicron variant is trickling out slowly right now, “it is difficult to have strong conviction for the outcome of the upcoming MPC meeting.” The Bank of England’s Monetary Policy meeting is scheduled for Dec. 16.

“Previously, we had thought a 15[basis point] hike in December was more likely than not, but this was a close call. We now think risk management considerations will dominate in next week’s [monetary policy committee] deliberations,” said Stehn, in a note.

Meanwhile travel-related stocks were trading lower in London. Expectations of more restrictions around the globe were weighing on the sector, despite, Pfizer’s
PFE,
+1.86%
assessment that three vaccines can “neutralize” the omicron variant — based on an early, lab study, said Chris Beauchamp, chief market analyst at IG.

“The U.K.’s move to new restrictions points toward the expected playbook for the weeks to come, and could well put some pressure on equity markets in what is normally a fairly positive time,” Beauchamp wrote in a note.

Shares of International Consolidated Airlines
IAG,
-3.42%
fell 3.7%, InterContinental Hotels
IHG,
-1.41%

IHG,
-1.21%
shares were down 2%. Wizz Air
WIZZ,
-3.15%
shares fell 3.7%. Rolls-Royce
RR,
-4.21%
shares also declined top decliner, despite a trading update from the aeroengine manufacturing company.

Rolls-Royce said it restored positive free cash flow in the third quarter and a gradual recovery international flying, alongside a market recovery for its power systems were helping to drive that performance. The stock has lost 16% in the past month, noted Beauchamp.

On the move higher were shares of Moonpig
MOON,
+3.91%,
up over 2% after the recently floated online greeting-card and gift platform said Thursday first-half 2022 pretax profit fell on lower revenue, but sees full-year revenue to be at the upper end of guidance.

GameStop also disclosed that the Securities and Exchange Commission issued a subpoena calling for additional documents related to an investigation into trading activity in the “meme stock” earlier this year.

Don’t miss: Opinion: If GameStop earnings looked weak to you, you’re not who GameStop really cares about.

The stock
GME,
-4.55%
dropped as much as 5.4% after the open, then pared losses to be down 2.4% in morning trading. The stock has now plunged 31.5% since it closed at a 5 1/2-month high of $247.55 on Nov. 22.

A stock selloff on the day after earnings shouldn’t be much of a surprise to investors, as the stock has fallen the day after 11 of the previous 13 quarterly reports.

Wedbush’s Pachter reiterated the underperform rating he’s had on the stock since March, and cut his price target to $45 from $50. His new target implies about 73% downside from current levels.

“Yet again, management failed to provide clarity around a long-awaited digital transformation plan that has been hinted at in the past but has yet to crystallize,” Pachter wrote in a note to clients, which he titled “Another quarter, still no turnaround strategy in sight.”

He did make some positive comments about the company, however, saying that with sales growth expected to be “flattish” in 2022, he remains “quite optimistic” that GameStop will return to profitability by then. Meanwhile, he reiterated that it’s not the company’s financial and business outlook that keeps him bearish.

“The high-profile short squeeze that emerged earlier this year and ongoing support from certain retail investors…have spiked the share price to levels that are completely disconnected from the fundamentals of the business,” Pachter wrote. “The current share price level coupled with management’s failure to clearly articulate a growth strategy leads us to believe that an underperform rating is warranted.”

The stock achieved its “meme” status after the stock rocketed 1,745% from the end of 2020 through Jan. 27, when it closed at a record $347.51. Although the stock has more than halved since then, it was still up 800% year to date, while the S&P 500 index
SPX,
-0.29%
has advanced 25%.

Read more: GameStop and AMC stocks soar on another day of wild trading in heavily shorted companies.

Also read: GameStop frenzy puts clearinghouses in spotlight as investors weight systemic risk fears.