Biden Set To Make Huge Inflation Move; What To Do Now

Dow Jones futures open on Sunday evening, along with S&P 500 futures and Nasdaq futures. The stock market rally diverged last week, with Apple (AAPL) and other megacap techs thriving, which masked some underlying weakness. That comes as President Joe Biden is about to announce whether he will nominate Federal Reserve chief Jerome Powell for a second term with inflation at a 30-year high. Finally, Rivian Automotive (RIVN) is consolidating after the initial-post RIVN IPO surge. Is it time to buy this EV startup?

Apple stock, Amazon.com (AMZN), Tesla (TSLA), Nvidia (NVDA) and Microsoft (MSFT) drove the Nasdaq composite to record highs. The Nasdaq and especially the Nasdaq 100 are looking extended. But the Nasdaq advance-decline has been weakening. Meanwhile, the Dow Jones and Russell 2000 fell last week as tumbling oil prices and Treasury yields hit energy stocks and financials. Blame renewed Covid fears and restrictions, which are also hitting travel names.

Will Biden Nominate Fed Chief Powell For Second Term?

President Biden on Tuesday suggested he would announce his Federal Reserve chair nomination in “about four days,” though a White House official later said a decision would come before Thanksgiving.

Will Biden stick with Fed chief Powell, or go with someone else, such as Fed Gov. Lael Brainard?

Stock and bond markets clearly favor Powell, whose current term as Fed chairman ends early next year.

Fed chief Powell is a known quantity, and gets high marks on Wall Street for his swift action during the coronavirus crash. Now, the Fed is just starting to scale back asset purchases with inflation a major issue. There’s speculation that policymakers could step up the pace of the Fed taper, perhaps as soon as the December meeting. But resurgent Covid cases could derail economic growth once again. This is a delicate time.

Many observers believe that, at least on monetary policy, Fed Gov. Brainard would be quite similar to Powell. But there’s always the unknown. And it’s not just policy.

Communicating to financial markets is a key role for the Federal Reserve chair, explaining not only what the central bank is doing now, but what it may do as economic trends develop. Powell had some rocky moments on policy and communication early on, but has grown more deft in his press conferences. Part of that also reflects analysts and investors learning how to interpret Powell’s statements.

A weekend Fed chief pick could be seen as giving stock and bond markets more time to digest it, suggesting someone other than Powell. On the other hand, Biden might have wanted to wait until after the House passed the reconciliation bill on Friday. That would suggest Biden might be apt to renominate Powell.

One key factor in favor of Fed chief Powell is that many GOP senators would likely support a second term. President Trump picked Powell. Another choice, such as Brainard, might struggle to get confirmation. However, a few Democratic senators have urged Biden to not renominate Powell.

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