Stocks Lose Steam as Joe Biden Keeps Jerome Powell for Fed Chair

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Key Takeaways

Wall Street stocks give up session gains as investors digest Powell’s second four-year term
President Joe Biden decided to nominate Jerome Powell for a second term as Fed chief

What’s on Focus in the Markets?

US stocks lost early gains and finished lower on Monday. The whipsaw trading followed the announcement that President Joe Biden will tap Jerome Powell for a second term as Fed chief. As it appears, investors seem to favor Jerome Powell as the Chairman of the Federal Reserve. And for good reasons.

Since the Fed’s founding in 1913, Mr. Powell is the most hawkish, or aggressive, Fed chief in terms of monetary policy. During his four-year term, he introduced the most generous monetary stimulus in the history of the US.

In more detail, over the past 18 months, he flooded the financial markets with ample liquidity. More precisely, $120 billion a month. In comparison, his predecessor, Ben Bernanke, injected $85 billion a month into the US economy. And that was a response to the financial crisis of 2008.

Where Are Stocks Headed?

The announcement was greeted by Wall Street as major indexes rose significantly. The S&P500, for example, pushed higher by about half a percent to set at a new all-time session high. In addition, the Dow Jones Industrial Average rallied about 0.6% as real-economy stocks gained the most.

Oddly, the benchmark indexes pared gains and turned lower on the day as the session drew to a close.

The Nasdaq Composite, for example, declined more than 1% on the day. In individual stocks, Netflix and Amazon lost about 3% each.

What’s the Latest News on Bitcoin?

The cryptocurrency market, in the meantime, went through a quiet trading session Monday. The price of bitcoin, the biggest digital asset, remained largely pinned near $57,000 per coin. Ether, on the other hand, dropped about 2% to $4,200.

Presently, the crypto space is trading mostly sideways. Early on Tuesday, bitcoin’s price floats slightly below $57,000. Ether, the second-biggest token, is also moderately lower on the day, at $4,200 apiece.

Despite the recent slump, crypto traders and investors are certain the rally will resume once fresh news stirs the market. To this end, many long-term investors use the dip as an entry point to dive into their favorite crypto assets.

What’s Happening in Forex?

In forex markets, the US dollar regained its dominance across the currency board. In other words, the EUR/USD, and the GBP/USD, dropped about half a percent each after Jerome Powell’s nomination.

The greenback has been showing signs of strength over the past months as traders jump to the American currency in an effort to find a safe haven. That said, the US dollar is expected to return more interest once the Federal Reserve begins to tighten monetary policy. More precisely, once Fed officials raise the interest rate.

Similar to bitcoin’s dip, many forex traders use the current 16-month low in the EUR/USD to enter long positions.

What’s Next for Traders and Investors?

Later in the week, on Wednesday, the US will report its GDP data. The news could create heightened volatility in the US dollar.

On Thursday, stocks will be closed in observance of the Thanksgiving holiday. Additionally, Friday’s market session will be shortened to 1 pm.

Today’s Economic Calendar (EST times)

04:30 am, GBP, Composite, Manufacturing, Services PMI, Preliminary (Oct)
08:00 pm, NZD, RBNZ Interest Rate Decision, and Rate Statement
09:00 pm, NZD, RBNZ Press Conference