Stocks ended a choppy session mixed on Monday at the start of a holiday-shortened week, as traders considered the highly anticipated renomination of Federal Reserve Chair Jerome Powell to the top role at the central bank.
The Dow ended just slightly higher after adding as many as 328 points, or 0.9%, at session highs. The S&P 500 ended lower after rising to a record intraday high earlier in the session, with technology stocks underperforming and extinguishing earlier gains. The Nasdaq lagged to drop more than 1% after opening higher.
President Joe Biden on Monday announced he was nominating Federal Reserve Chair Jerome Powell for a second term leading the central bank, ending weeks of speculation over who would be tapped for the role. Financial stocks jumped following the announcement.
Biden was expected to select either Powell or current Fed Governor Lael Brainard as Fed chair. Following the nomination, Powell will go before the Senate Banking Committee for approval, and if confirmed, will serve another four-year term.
“I think this was largely expected by markets. Certainly there were some conversations in markets over the last couple of weeks about Brainard potentially being elevated to the Fed chair position. But by and large the expectation was for consistency,” Erin Browne, Pimco managing director and portfolio manager, told Yahoo Finance Live on Monday. “You may see a little bit of a rally on the back of this with the expectation that policy is going to remain in place and intact, and everything that’s been articulated already by the Fed is likely to continue into 2022 and beyond.”
Powell, who led the central bank throughout the COVID-19 period, would be tasked with helping further guide the Fed as it grapples with whether the economic recovery has progressed enough to warrant a deeper reduction in monetary policy support.
"The most important question in the moment right now is how high the Fed ultimately hikes interest rates," John McClain, portfolio manager for Brandywine Global's high yield and corporate credit strategies, told Yahoo Finance Live on Friday. "Right now, expectations are for about two and a half to three hikes in 2022, and probably getting to about 175 basis points on Fed funds ultimately."
"The market and the media are focused on a faster Fed tapering and hiking sooner than June of next year," he added. "And importantly, we're seeing inflation and things that matter to the consumer, prices at the pump, food, rent, all are going higher. And the list kind of goes on and on."
More data on the inflation front is set to be released this week, which will further provide data hinting at whether the Fed may need to step in sooner rather than later to curb persistently elevated prices. The core personal consumptions expenditures (PCE) index from the Bureau of Economic Analysis out Wednesday, which serves as the Fed's preferred inflation gauge, will likely show a 4.1% over last year, based on Bloomberg consensus data. This would be the biggest annual jump in about three decades.
Optimism over new deal-making activity across numerous industries also helped push stocks higher on Monday. Constellation Brands (STZ), the maker of Corona beer, is reportedly exploring a deal to combine with Coca-Cola-backed (KO) energy drink company Monster Beverage, according to a Bloomberg report on Monday. And private equity firm KKR & Co. made an about $12 billion bid to bring Telecom Italia private, sending shares of the Italian telecommunication giant sharply higher.
Investors also shook off jitters from late last week, when rising COVID-19 cases globally set off fresh concerns over the virus's spread. The Austrian government implemented a fourth national lockdown since the start of the pandemic, effective Monday and lasting for at least 10 days, to try and stem jumping infections. Germany has considered a similar move. The latest round of stay-in-place orders raised concerns for investors that a drop in consumer mobility might ultimately place renewed pressure on economic activity domestically and abroad.
"In the United States, COVID cases have declined but remained above summer lows and have been edging up recently," Rubeela Farooqi, High Frequency Economics chief economist, wrote in a note Monday. "We do not expect lockdowns in the United States. Experience with the Delta variant suggests that mandated lockdowns are not needed to suppress activity. Wary of health risks from rising case counts, people may voluntarily avoid high-contact activity."
4:05 p.m. ET: Stocks end mixed: Nasdaq drops 1.3%, tech stocks pull back after Biden announces Powell as pick for Fed chair
Here were the main moves in markets as of 4:05 p.m. ET:
S&P 500 (^GSPC): -15.01 (-0.32%) to 4,682.95
Dow (^DJI): +17.27 (+0.05%) to 35,619.25
Nasdaq (^IXIC): -202.68 (-1.26%) to 15,854.76
Crude (CL=F): +$0.41 (+0.54%) to $76.35 a barrel
Gold (GC=F): -$46.00 (-2.48%) to $1,805.60 per ounce
10-year Treasury (^TNX): +8.9 bps to yield 1.6250%
3:15 p.m. ET: 'U.S. stocks are the best asset in the world in terms of equities': BMO's Belski
Brian Belski, chief U.S. equity strategist for BMO Capital Markets, struck an upbeat tone on the path forward for U.S. stocks with Yahoo Finance Live on Monday. The S&P 500 set a record intraday high during the session, buoyed by optimism over Fed Chair Powell's renomination.
"I think at the end of the day, investors around the world are learning finally that U.S. stocks are the best asset in the world in terms of equities," Belski said. "We think that consistency continues and so our 4,800 target for the end of this year ... I think it's in jeopardy of being higher than that."
"As we begin to moderate in terms of a lot of trends, whether it's price or earnings or valuations or inflation, interest rates ... the key thing is going to be about consistency and the high-quality asset value that U.S. equities afford investors around the world," he added.
12:34 p.m. ET: What economists, strategists are saying about Powell's renomination
Federal Reserve Chair Jerome Powell's renomination to the top leadership role at the central bank was expected to be the most likely outcome by many market participants, even as some uncertainty grew in recent weeks that President Joe Biden might instead nominate Fed Governor Lael Brainard.
According to a number of economists and strategists, the continuity of policy provided through Powell's nomination is by and large positive for U.S. stocks. Here's what some pundits had to say about the decision in commentary provided to Yahoo Finance:
"I have to think that maybe Biden has been wounded by inflation. His job approval numbers are way down. It looks like the Democrats may lose the House next fall. So maybe Biden was thinking, you know, 'This inflation issue has really hurt me – maybe there's somebody else.' And that may have been a factor in this taking so long [to announce the Fed chair nomination]." – Greg Valliere, chief U.S. policy strategist
"By large, the expectation was for consistency at the Fed to remain and for Jerome Powell to be renamed or renominated as Fed chair ... I think having a consistent hand in place is really what the market is looking for in order to guide us through potentially raising rates next year." – Erin Browne, PIMCO managing director and portfolio manager
"Jerome Powell's renomination provides significant certainty for markets, as investors have grown accustomed to Powell's easy money policies and steady hand during the Covid-19 crisis ... It’s clear that President Biden went with splitting the ticket in renominating Powell as Chair and nominating Lael Brainard as Vice Chair. This is not the time for change at the Federal Reserve, given inflation and supply chain worries and a rebound in Covid-19 cases." – Robert Schein, chief investment officer for Blanke Schein Wealth Management
"Powell is sound, tested, respected and familiar to markets ... replacing him could have triggered major downward pressure on stocks, as investors dislike uncertainty and the unknown." – George Ball, chairman of Sanders Morris Harris
"Biden may have felt his hands were tied since ushering Brainard's nomination to be Chair through the Senate would have been difficult ... With Brainard replacing [Fed Vice Chair Richard Clarida] and Quarles out, that means Biden now has three Board vacancies to fill. The statement today suggests that we can expect announcements on nominees as early as next month. It is those appointments that could generate a more marked shift in the outlook for monetary policy." – Capital Economics U.S. economics team
10:17 a.m. ET: Big Tech stocks rally as investors after Powell renomination; Apple and Microsoft set records
Big Tech stocks jumped Monday morning after Biden said he was nominating Powell to remain Federal Reserve chair for another four years.
The announcement was at least momentarily taken favorably by investors in technology and growth stocks, which are typically viewed as beneficiaries of lower rates. Apple's (AAPL) stock, a heavily weighted component in the major U.S. equity indexes, jumped 3% to reach a record intraday high, and Microsoft (MSFT) rose nearly 2% to reach an all-time high of its own. Both stocks commanded market capitalizations well over $2.6 trillion following the gains.
10:06 a.m. ET: Existing home sales unexpectedly rose in October to reach highest level since January
Sales of previously owned homes in the U.S. unexpectedly jumped to their highest level in nine months in October, signaling housing demand was picking up against a backdrop of relatively low mortgage rates and strengthening labor market conditions.
Existing home sales rose by 0.8% month-over-month in October, reaching an annualized rate of 6.34 million, according to data from the National Association of Realtors. Consensus economists were looking for existing home sales to fall to an annualized rate of 6.2 million for October, from September's 6.29 million, based on Bloomberg consensus data.
For the year-to-date, existing home sales have risen by 11% compared to the same period in 2020 and by 13% compared to 2019, or before the pandemic. Existing home sales are on track to reach at least 6 million units this year, which would mark the best sum in 15 years.
9:30 a.m. ET: Stocks jump after Biden renominates Powell for Fed chair
Here's where markets were trading just after the opening bell:
S&P 500 (^GSPC): +21.2 (+0.45%) to 4,719.16
Dow (^DJI): +131.53 (+0.37%) to 35,733.51
Nasdaq (^IXIC): +72.50 (+0.49%) to 16,136.85
Crude (CL=F): -$0.71 (-0.93%) to $75.23 a barrel
Gold (GC=F): -$31.40 (-1.70%) to $1,820.20 per ounce
10-year Treasury (^TNX): +5.7 bps to yield 1.593%
8:48 a.m. ET: Chicago Fed National Activity Index rebounds to higher level than expected in October
An index tracking economic activity in the Chicago Federal Reserve region jumped more than expected in October, with a jump in production in the Midwest helping fuel the results.
The Chicago Fed National Activity Index rose to 0.76 in October from September, topping estimates for 0.10, according to Bloomberg-compiled data. In September, the index came in at -0.18. Readings in positive territory indicate above-average growth.
Production-related indicators contributed positively to the overall index after subtracting from the headline figure in September. Industrial production was up by 1.6% in October following a 1.3% drop the prior month. And employment-related indicators also accelerated, contributing 0.24 points to the index after a 0.16-point contribution in September.
7:52 a.m. ET Monday: Stock futures advance
Here's where markets were trading Monday morning:
S&P 500 futures (ES=F): +13.75 points (+0.29%), to 4,708.25
Dow futures (YM=F): +88 points (+0.25%), to 35,637.00
Nasdaq futures (NQ=F): +64.75 points (+0.39%) to 16,639.75
Crude (CL=F): -$0.13 (-0.17%) to $75.81 a barrel
Gold (GC=F): -$8.90 (-0.48%) to $1,842.70 per ounce
10-year Treasury (^TNX): +4.5 bps to yield 1.581%
Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter