S&P 500 at record high as banks rally on Powell nomination

  • Financials rise after expectations for interest rate hike
  • Nasdaq falls as high government bonds yield pressured tech stocks
  • Apple at record high, JPM sees iPhone offering improving
  • Fed Governor Lael Brainard Becomes Vice Chair
  • Indices: Dow up 0.86%, S&P up 0.66%, Nasdaq down 0.16%

Nov 22 (Reuters) – The S&P 500 hit a record high Monday after President Joe Biden elected Federal Reserve chairman Jerome Powell to lead the central bank for a second term, with Wall Street lenders rallying over the prospect of interest rate hikes in 2022.

But the Nasdaq (.IXIC) lagged its competitors, falling from record highs as rising government bond yields weighed on key technology stocks.

Powell’s nomination was largely welcomed by investors hoping for no major changes in the Fed as it leads the economy through a post-COVID recovery. The central bank will usher in a return to pre-pandemic policies by the end of 2022. read more

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Fed Governor Lael Brainard, who was the other top candidate for the job, will become vice chairman, the White House said.

“Markets like predictability… while Brainard might have been a good choice, markets wouldn’t know what to expect from her, even if the general consensus was that it meant lower rates for a longer period of time,” said Randy Frederick, general manager of Trading and Derivatives, Charles Schwab, Austin, Texas.

The S&P 500 banking sector (.SPXBK) rose 2.8%, following a sharp rise in government bond yields as investors valued policy tightening by the first half of 2022. Wells Fargo & Co (WFC. N) led gains at the major Wall Street banks, adding 3.7%.

“The message is that we are on our way to reduce the tapering and we are on our way to higher interest rates, which will most likely be raised by the middle of next year, and I think Wall Street has already processed most of that,” says Robert. Pavlik, senior portfolio manager at Dakota Wealth Management.

“This is kind of confirmation that the Fed has a plan.”

Futures contracts linked to the Fed’s policy rate indicated that money markets now expect the US central bank to raise interest rates by 25 basis points in June next year from an earlier estimate in July.

At 11:46 a.m. ET, the Dow Jones Industrial Average (.DJI) was up 304.44 points or 0.86% to 35,906.42 and the S&P 500 (.SPX) was up 30.82 points or 0.66% to 4,728. 78. The Nasdaq Composite (.IXIC) fell 26.03 points, or 0.16%, to 16,031.41.

Investors now awaited a slew of economic data this week, including IHS measurements of business activity, personal consumption spending and minutes from the Fed’s last meeting.

Apple Inc (AAPL.O), among others, jumped 2.6% to an all-time high after JP Morgan signaled possible improvements to iPhone 13 shipments in the coming months.

Tesla Inc (TSLA.O) gained 3.9% after CEO Elon Musk tweeted that the Model S Plaid will “probably” come to China around March. read more

Activision Blizzard (ATVI.O) slumped 2.4% after a media report that video game publisher director Bobby Kotick would consider leaving if he couldn’t quickly allay concerns about corporate culture. read more

On the NYSE, emerging issues outnumbered decliners by a 1.55-to-1 ratio. The number of declining issues outpaced the avant-garde by a 1.30 to 1 ratio on the Nasdaq.

The S&P index recorded 44 new highs in 52 weeks and nine new lows, while the Nasdaq recorded 120 new highs and 404 new lows.

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Reporting by Ambar Warrick and Devik Jain in Bengaluru; Additional reporting by Bansari Mayur Kamdar and Shreyashi Sanyal; Editing by Shounak Dasgupta and Maju Samuel

Our Standards: The Thomson Reuters Trust Principles.

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