Fed chief nominee Powell signals he'll stay the course in confirmation hearing
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Stocks closed at new records Tuesday after bouncing around during the regular session as geopolitical tensions and the domestic agenda pulled the market in different directions.
All three main indexes had traded in record territory earlier but came off highs as North Korea tested a new intercontinental ballistic missile. But the indexes soon regained lost ground on news that the Republican tax proposal is one step closer to a Senate vote.
How did the main benchmarks perform?
The Dow Jones Industrial Average climbed 255.93 points, or 1.1%, to 23,836.71. The S&P 500 added 25.62 points, or 1%, to 2,627.04. The Nasdaq Composite Index was up 33.84 points, or 0.5%, to 6,912.36.
The three equity benchmarks have set multiple records in 2017, boosted by factors such as an expanding U.S. economy, rising corporate profits, anemic expected returns for other assets and bets that the Trump administration will deliver tax cuts and other business-friendly policies.
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What drove the markets?
The Senate Budget Committee voted 12-11 (http://www.marketwatch.com/story/senate-budget-committee-advances-republican-tax-bill-on-party-lines-2017-11-28) to advance the Republican tax bill after Sens. Bob Corker and Ron Johnson joined fellow Republicans as "yes" votes. A full Senate vote could be possible as early as Thursday.
North Korea fired a ballistic missile around 3 a.m. local time (http://www.foxnews.com/world/2017/11/28/north-korea-fires-ballistic-missile-south-korea-officials-say.html?link=mktw) which is believed to have flown about 620 miles before landing in the water between the Korean peninsula and Japan. In retaliation, South Korea launched a "precision strike" missile exercise, according to Korean and U.S. news reports.
Earlier, Jerome Powell, President Donald Trump's pick to run the Federal Reserve, testified at a Senate confirmation hearing (http://www.marketwatch.com/story/meet-the-next-fed-boss-same-as-the-old-boss-jerome-powell-to-face-senate-glare-2017-11-26), giving investors their first big clue on how he hopes to operate at the Fed. His opening statement for the hearing was released Monday, indicating he expects to stay on the course (http://www.marketwatch.com/story/powell-to-testify-fed-will-continue-to-hike-interest-rates-shrink-the-balance-sheet-2017-11-27) set by the current Fed chief, Janet Yellen.
Read MarketWatch's live blog of the confirmation hearing (http://blogs.marketwatch.com/capitolreport/2017/11/28/live-blog-and-video-of-jerome-powell-confirmation-hearing/)
In a speech Tuesday, New York Fed President William Dudley called for the public reporting of Treasury market transactions (http://www.marketwatch.com/story/ny-fed-chief-calls-for-public-reporting-of-treasury-market-transactions-2017-11-28).
Late Monday, Dudley said he still expects a strong job market will help push inflation up over time, and he repeated his view that low inflation with low unemployment is "not actually a bad thing (http://www.marketwatch.com/story/feds-dudley-expects-strong-job-market-will-eventually-boost-inflation-2017-11-27)."
Check out:MarketWatch's Economic Calendar (http://www.marketwatch.com/economy-politics/calendars/economic)
On the data front, the Conference Board's consumer-confidence index jumped to 129.5 in November, well above the 124.8 forecast from economists polled by MarketWatch and marking a 17-year high (http://www.marketwatch.com/story/feeling-good-consumer-confidence-hits-17-year-high-2017-11-28).
The advanced U.S. trade deficit in goods rose 6.5% to $68.3 billion in October (http://www.marketwatch.com/story/us-trade-deficit-surges-in-october-advanced-report-shows-2017-11-28). Separately, home prices rose at their fastest pace in more than three years in September (http://www.marketwatch.com/story/house-prices-rise-at-fastest-pace-since-june-2014-case-shiller-says-2017-11-28).
Read:Bond traders don't care about nonfarm payrolls anymore (http://www.marketwatch.com/story/bond-traders-dont-care-about-nonfarm-payrolls-anymore-in-one-chart-2017-11-27)
Stocks ignored the cancellation of a meeting between Trump and congressional leaders, including top Senate Democrat Chuck Schumer and top House Democrat Nancy Pelosi, after the president tweeted that he didn't see prospects for a deal to avoid a government shutdown on Dec. 8.
What are strategists saying?
Ian Winer, head of the equities division at Wedbush Securities, played down investors' reactions to the missile test.
"I don't think anyone views this as a threat and I am not seeing any supply. It just feels like the buyers stepped away for a few minutes," he said.
Meanwhile, Powell's impact on the market was even more muted.
"[Powell's] testimony emphasized his five years of FOMC experience as qualification for the role and we fully expect the Senate will confirm him. Based on his comments today, we see no reason to change our forecast that the Fed will raise rates in December and then a further four times next year. As Powell said, the case for a December rate hike is 'coming together,'" said Michael Pearce, U.S. economist at Capital Economics, in a note.
"This is a strong market that continues to grind up, and I expect the market will continue to move higher throughout the end of the year. The market is very comfortable with valuations here, and so long as earnings continue to move up, I don't see that changing," said Wayne Kaufman, chief market analyst at Phoenix Financial Services.
"Good earnings and strong economic data" continue to be the main focus for investors, said Art Hogan, chief market strategist for Wunderlich.
Hogan said market participants appear confident congressional leaders will seek to avert a government shutdown ahead of midterm elections in 2018, noting that recent shutdown showdowns have resulted in deals.
Quincy Krosby, chief market strategist at Prudential Financial, stressed that the backdrop for stocks is extremely positive.
"This is a particularly hospitable period for the market, but certainly seeing a solid consumer going into the holiday season underpins the positive tone of the market. Economic data releases are solid as well, and while there are concerns surrounding the tax reform process, there's a growing consensus that there will be a legislative package by early 2018, with corporate tax cuts as the focus," she said.
Which stocks were key movers?
Financial stocks were big winners, with every component in the S&P 500 financials sector finishing higher, led by Bank of America Corp.(BAC) and Navient Corp.(NAVI) which both rose 4%.
Shares in Buffalo Wild Wings Inc.(BWLD) climbed 6.3% after Arby's Restaurant Group Inc., which is owned by private-equity firm Roark Capital Group, agreed to acquire the restaurant chain (http://www.marketwatch.com/story/roark-backed-arbys-to-buy-buffalo-wild-wings-in-deal-valued-at-29-billion-including-debt-2017-11-28) for $157 a share in a deal valued at $2.9 billion, including debt.
Wells Fargo & Co.'s stock (WFC) rose 3%. Earlier, it was reported that the bank overcharged foreign-exchange clients (http://www.marketwatch.com/story/wells-fargo-overcharged-hundreds-of-business-clients-report-2017-11-27).
Bon-Ton Stores Inc. (BONT) jumped 8% after the retailer reported its November same-store sales rose 3.1% this month (http://www.marketwatch.com/story/bon-ton-stores-shares-spike-after-november-sales-rise-2017-11-28).
How did other assets fare?
European stocks (http://www.marketwatch.com/story/oil-stocks-drive-european-stocks-higher-as-shell-strikes-upbeat-tone-2017-11-28) traded higher, while Asian markets closed mixed (http://www.marketwatch.com/story/asian-markets-mixed-as-investors-keep-wary-eye-on-chinese-stocks-2017-11-27). Oil futures (http://www.marketwatch.com/story/oil-prices-move-lower-as-doubts-creep-in-over-opec-outcome-2017-11-28) continued to pull back, as some analysts voiced doubts over what a Thursday meeting of key producers will achieve. The ICE U.S. Dollar Index (http://www.marketwatch.com/story/dollar-rises-as-traders-wait-to-see-if-feds-powell-will-give-hawkish-hints-2017-11-28) strengthened, and gold futures (http://www.marketwatch.com/story/gold-tips-higher-ahead-of-feds-powell-confirmation-hearing-2017-11-28) were roughly unchanged.
--Ryan Vlastelica and Victor Reklaitis contributed to this article.
(END) Dow Jones Newswires
November 28, 2017 16:39 ET (21:39 GMT)