Stocks closed out last week at a new record high.
After first touching 23,000 on Tuesday, the Dow blew through this milestone on Wednesday and staged a roughly 300 point rally from its Thursday morning lows to its week-end highs.
The benchmark S&P 500 and tech-heavy Nasdaq also joined the blue chip index at fresh records in a week that was heavy on earnings, news on tax reform, and reports about who will be the next leader at the Federal Reserve.
On this background, markets will begin one of the busiest weeks of the year with hundreds of corporate earnings set for release, the first read on third quarter GDP due out on Friday, and all the Washington, D.C. storylines still in play.
Notable earnings due out this week include Hasbro (HAS), General Motors (GM), Lockheed Martin (LMT), Caterpillar (CAT), McDonald’s (MCD), AT&T (T), Chipotle (CMG), AMD (AMD), Visa (V), Coca Cola (KO), Boeing (BA), Comcast (CMCSA), Ford (F), Celgene (CELG), UPS (UPS), Alphabet (GOOGL), Amazon (AMZN), Microsoft (MSFT), Expedia (EXPE), ExxonMobil (XOM), and Chevron (CVX) among others.
On the data side, Friday’s release of the first look at third quarter GDP will be the highlight, with Wall Street economists forecasting continued strength in overall economic growth.
And on Wednesday, Yahoo Finance will host its second-ever All Markets Summit, featuring interviews with IAC Chairman Barry Diller, GAMCO Investors CEO Mario Gabelli, and Council of Economic Advisers Chair Kevin Hassett. The full schedule can be found here and the entire conference will be live-streamed all day on YahooFinance.com.
Monday: Chicago Fed national activity index (-0.13 expected; -0.31 previously)
Tuesday: Markit U.S. manufacturing PMI, October (53.4 expected; 53.1 previously); Markit U.S. services PMI, October (55.1 expected; 55.3 previously); Richmond Fed manufacturing index, October (16 expected; 19 previously)
Wednesday: Durable goods orders, September (+1% expected; +2% previously); FHFA home price index, August (+0.4% expected; +0.2% previously); New home sales, September (-1% expected; -3.4% previously)
Thursday: Initial jobless claims (235,000 expected; 222,000 previously); Pending home sales, September (+0.5% expected; 2.6% previously)
Friday: Third quarter GDP, first estimate (+2.6% expected; +3.1% previously); University of Michigan consumer sentiment, October (100.6 expected; 101.1 previously
The next Fed Chair
The Trump administration’s search for the next chair of the Federal Reserve appears to be winding down.
On Thursday, Politico reported that current Fed governor Jerome Powell is the leading candidate to get President Donald Trump’s nomination to be the next leader of the U.S. central bank. This news came after Trump met with current chair Janet Yellen on Thursday.
Bloomberg, meanwhile, reports that Powell and Stanford professor John Taylor are the two leading candidates for the job, with Trump having not yet made up his mind. Reuters reported last week that Trump will likely announce his decision early next month before a trip to Asia.
So with Trump yet to make up his mind ahead of the administration’s self-imposed deadline, it seems that all five candidates for Fed chair — who also include Kevin Warsh, Gary Cohn, and Yellen — remain in play.
But Wall Street commentary has coalesced around a consensus that there will be a change at the top of the central bank and that Powell represents the most continuity between regimes.
“[Powell is] the non-Yellen candidate who would offer the most continuity with respect to monetary policy,” said JP Morgan economist Michael Feroli. “In the past Powell’s monetary policy views had been judged as somewhat hawkish relative to Yellen. More recently it is hard to distinguish Powell’s comments on monetary policy from those of Yellen or other members of the Fed leadership.”
Feroli also notes that Powell is a Republican who previously served in the George H.W. Bush administration where he was under secretary of the Treasury.
Nominating Powell, then, likely clears a path for his nomination being confirmed by the Senate amid a legislative environment that has so far accomplished little in the Trump era.
Now, some experts have argued that the top spot at the Fed won’t necessarily usher in a sweeping change to how the central bank conducts policy in the next year or so.
Rick Rieder, global chief investment officer of fixed income at BlackRock, told Yahoo Finance earlier this month that, “Elected officials oftentimes come in and talk about the prior person who occupied that seat and change it dramatically.
“At the Fed, the staff drives a lot of the thinking and so, at least for the near-term, I think [the impact a new Chair will have on markets] is muted.”
But it isn’t just the top job at the Fed that remains open. Currently, the vice chair position as well as two other board vacancies, which would become three if Powell were elevated to Fed chair, are all open to nominations from the Trump adminsitration.
Trump, then, has a chance to remake the Fed in his own image — or the image of his advisors — with many thinking a Trump-shaped Fed will be more hawkish than the Yellen-Bernanke era.
“Even if Trump picks Powell, we wouldn’t be surprised to see the White House choosing hawkish nominees to fill the vacancies on the Fed Board,” writes Paul Ashworth, an economist at Capital Economics.
So markets will certainly react whenever Trump formally announces his nominee. But the slower, perhaps more subtle, change at the central bank in the coming months could have a bigger long-term impact on markets, interest rates, and the broader economy.
Myles Udland is a writer at Yahoo Finance. Follow him on Twitter @MylesUdland
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