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Pre-market stocks: Jay Powell’s second term at the Fed could be more difficult than his first




What’s happening: On Monday morning, Biden officially announced his intention to appoint Powell for a second four-year term, opting for continuity at an uncertain time. Lael Brainard, Powell’s main rival for the post, will be named vice chairman.
Faced with a once-in-a-century pandemic, Powell’s first term was undeniably difficult. If he received confirmation from the Senate, his second term could be even more difficult.

“We’re starting out in a pretty unstable world economically,” Yiming Ma, professor of finance at Columbia Business School, told me.

The main reason is inflation, which is increasing at its fastest rate in three decades.

Powell must now decide how quickly the Fed is removing crisis measures designed to stimulate the economy during the Covid-19 lockdowns. It is a delicate process. Waiting too long to act and control inflation becomes much more difficult. To move too early, and it risks jeopardizing the resumption of employment.

“In a sense, you could argue that when to tighten policy how quickly and how far you tighten is a far more difficult decision than the decision to relax policy, especially when you are faced with a pandemic. where you pull out the emergency manual, ”Brett Ryan, senior US economist at Deutsche Bank, told me.

The Fed has already set a timetable to cancel bond purchases, one of the main tools it has used to facilitate access to credit during the pandemic. The big question now is how long it will take to raise interest rates.

“The pace and timing of this rate hike cycle will be very important in the first two years of this new term,” Ma said.

More than three-quarters of investors now believe rates will have risen near zero after the Fed meeting in June 2022, according to CME Group’s FedWatch tool. Goldman Sachs predicted on Monday that the Fed would maintain its plan to gradually hike interest rates from July.
This isn’t the only shifting dynamic that Powell will face. Ryan of Deutsche Bank stressed that he will also face a new management team. Biden has yet to fill three seats on the board. The regional Fed chairmen in Boston and Dallas also recently resigned following an ethics scandal related to their trading activity.

“He’s going to be dealing with a whole new group of people,” Ryan said.

The political environment has also changed. Congress has given Powell enormous leeway to act in 2020. This time around, he could be the subject of further scrutiny, especially as inflation could be a contentious topic ahead of the mid-election. -Mandate of 2022.

The Fed’s approach to dealing with the climate crisis and economic inequality is also receiving more attention, as central banks around the world question whether they can or should use monetary policy to intervene on these issues.

Climate risks and inequalities “will be more of the conversation,” said Ma from Columbia. “In terms of how much that translates into actual policies… I think there’s a little more uncertainty there.”

Biden to release crude from strategic reserves

The United States is releasing 50 million barrels of oil from its strategic reserves in a bid to tackle rising oil and gas prices ahead of busy holiday travel season.

The latest: The White House has said it is coordinating with China, India, Japan, South Korea and the UK, amplifying the impact of the move.

US oil prices fell 0.4% for the last time, trading at around $ 76 a barrel.

The prospect of the United States and other countries releasing emergency barrels had already helped push oil prices down. After going over $ 85 a barrel at the end of October, US oil prices have fallen by about 10%.

This in turn helped curb the spike in gasoline prices, which has become a political issue for President Joe Biden. The national average is $ 3.40 a gallon, a hair less than a week ago, according to AAA.

Some Democrats in Congress are push Biden to go even further, urging it to ban US oil exports as well.

“We must use all the tools at our disposal to bring down gasoline prices in the short term,” House members led by California Representative Ro Khanna said in a letter on Monday.

Take a step back: White House machinations could help drive down energy prices in the short term and bring immediate relief. But in the longer term, underinvestment in oil production should keep prices high.

Rivian’s stock surge has hit a speed bump

Shares of electric vehicle maker Rivian have soared to incredible highs since the company debuted on Wall Street earlier this month. But they are not invincible.

The stock plunged to 17% on Monday after the company said it was no longer working with Ford to jointly develop vehicles, reports my CNN Business colleague Chris Isidore. It closed down 8%. Shares fell another 3% in pre-market trading on Tuesday.
Rivien and Ford (F) the two issued statements saying needs have changed since the initial collaboration was announced, but stressing that Ford remains a major investor in Rivian. The automaker owns around 12% of the outstanding shares.

Remember: Rivian has generated a huge hype even though he has yet to report any income from the sale of his electric trucks. The company is now valued at nearly $ 101 billion, about $ 19 billion more than Ford.

But a large part of enthusiasm around Rivian is linked to its partnerships. In addition to his relationship with Ford, he has an agreement to deliver 100,000 vehicles to Amazon by 2025. This is a reminder that while the nature of those deals changes, the larger than life share price of the business seems vulnerable.


Abercrombie & Fitch (ANF), Best buy (BBY), Dick’s Sporting Goods (DKS), Dollar tree (DLTR), Jm smucker (SJM) and Dycom (of them) publish the results before the US markets open. Dell (DELL), Difference (GPS) and Nordstrom (JWN) report results after closing.

Also today: The Purchasing Managers Index for the United States arrives at 9:45 a.m.ET.

Coming tomorrow: a whole load of US economic data ahead of the Thanksgiving holiday. Watch for details on new home sales and inflation, as well as minutes from the latest Federal Reserve meeting.




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