Wall Street Breakfast: Powell Stays On

Powell stays on - Correction: Yesterday's WSB wrote that 2021 U.S. COVID deaths doubled over the previous year, though the figure surpassed 2020 fatalities last weekend (not doubled). The article has been updated accordingly.Treasuries yields and the dollar spiked, gold sold off and stocks rose and fell towards the end of the session on Monday after Jerome Powell was nominated for another four-year term at the Federal Reserve. The central bank is now expected to maintain its current course on tapering economic support as it grapples with rising inflation and lingering economic impacts of the pandemic. Less dovish or hawkish monetary policies typically coincide with higher interest rates as the cost of borrowing increases due to a tightness in financial conditions.2 for 1 deal: In another big announcement, Fed Governor Lael Brainard was elevated to vice chair, the bank's No. 2 role. There had been much speculation that she could have even taken the top job in recent weeks, with Brainard meeting with President Biden and progressive lawmakers calling for her appointment. By nominating both, the administration is able to rely on a steady hand at the Fed, while also addressing the need for taking regulatory concerns more seriously. Brainard is seen as the Democratic party's most accomplished economic policymaker, spearheading campaigns on big bank oversight and finding a path to address climate change through the Fed's financial stability mission.In terms of future policy, many have pointed to Powell's success in navigating the U.S. economy through COVID-19 and one of the worst contractions since the Great Depression. That doesn't mean he's without criticism, though he has largely been able to overshadow his detractors and opponents. We're starting to see a slight pivot from "inflation is transitory" and moves to policy normalization would "begin in a slow fashion," giving a greater sense of urgency and command of the economic backdrop.Next steps: The nominations of Powell and Brainard must be formally submitted to the Senate, which will refer them to the Senate Banking Committee. Confirmation hearings will then be scheduled, and the 100-member Senate will vote on their appointments, with both expected to be approved despite some partisan disagreements. "Our base case is that they will be cleared by the full Senate this year," said BTIG analyst Isaac Boltansky. Biden also has three vacancies to fill at the Fed's seven-member Board of Governors, including the vice chair for supervision role recently vacated by Randal Quarles.

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Top News Powell stays on Shutterstock Correction: Yesterday's WSB wrote that 2021 U.S. COVID deaths doubled over the previous year, though the figure surpassed 2020 fatalities last weekend (not doubled). The article has been updated accordingly. Treasuries yields and the dollar spiked, gold sold off and stocks rose and fell towards the end of the session on Monday after Jerome Powell was nominated for another four-year term at the Federal Reserve. The central bank is now expected to maintain its current course on tapering economic support as it grapples with rising inflation and lingering economic impacts of the pandemic. Less dovish or hawkish monetary policies typically coincide with higher interest rates as the cost of borrowing increases due to a tightness in financial conditions. 2 for 1 deal: In another big announcement, Fed Governor Lael Brainard was elevated to vice chair, the bank's No. 2 role. There had been much speculation that she could have even taken the top job in recent weeks, with Brainard meeting with President Biden and progressive lawmakers calling for her appointment. By nominating both, the administration is able to rely on a steady hand at the Fed, while also addressing the need for taking regulatory concerns more seriously. Brainard is seen as the Democratic party's most accomplished economic policymaker, spearheading campaigns on big bank oversight and finding a path to address climate change through the Fed's financial stability mission. In terms of future policy, many have pointed to Powell's success in navigating the U.S. economy through COVID-19 and one of the worst contractions since the Great Depression. That doesn't mean he's without criticism, though he has largely been able to overshadow his detractors and opponents. We're starting to see a slight pivot from "inflation is transitory" and moves to policy normalization would "begin in a slow fashion," giving a greater sense of urgency and command of the economic backdrop. Next steps: The nominations of Powell and Brainard must be formally submitted to the Senate, which will refer them to the Senate Banking Committee. Confirmation hearings will then be scheduled, and the 100-member Senate will vote on their appointments, with both expected to be approved despite some partisan disagreements. "Our base case is that they will be cleared by the full Senate this year," said BTIG analyst Isaac Boltansky. Biden also has three vacancies to fill at the Fed's seven-member Board of Governors, including the vice chair for supervision role recently vacated by Randal Quarles.       Economy Lowering prices As the Biden administration faces mounting frustration over inflation, the president will "deliver remarks on the economy and lowering prices for the American people" at 2 p.m. ET. That's according to a statement from the White House, which gave no other details on the expected content. Later today, Biden will travel to Nantucket, Massachusetts, where he and first lady Jill Biden will celebrate Thanksgiving. Bigger picture: Inflation has emerged as a big threat for Biden amid supply chain bottlenecks and other factors that still have to be brought under control. Take gasoline prices for example, which are at seven-year highs. While the White House has blamed OPEC+ for the surge, it's evaluating all tools to quell rising prices after the cartel snubbed its request to pump more. Biden may announce a release of oil from the U.S. Strategic Petroleum Reserve today, which would come in conjunction with India, Japan and South Korea. "I think we do have to be concerned about inflation. It's reached the levels that concern most Americans who are seeing it and their pocketbook when they go to the store to buy food or to fill up their cars," said Treasury Secretary Janet Yellen, who chaired the Fed from 2014 to 2018. "Over the longer run, the Fed needs to play an important role to make sure that [inflation] doesn't become endemic. And I know they can be counted on to do that." Other threats: Surging coronavirus cases in Europe has also seen countries reimpose lockdowns this week, but the U.S. is not thinking about those tools to put a damper on infections. "We are not headed in that direction. We have the tools to accelerate the path out of this pandemic; widely available vaccinations, booster shots, kid shots, therapeutics," White House COVID-19 response coordinator Jeff Zients told reporters. "We can curb the spread of the virus without having to in any way shut down our economy."       Sponsored 7 Alternative Investments for $890K in Investable Assets The next 10 years likely will be vastly different from the past 10, with lower equity returns, and increasing correlations across investments. Diversifying into alternative investments like gold and real estate can help investors address elevated inflation and low-interest-rates. The "Holy Grail" of uncorrelated assets could be art. Not only can art hedge against inflation, the WSJ recently described it as among the hottest markets on Earth. Contemporary Art prices averaged a real return of 23% when inflation is above 3%—four times higher than the 7 major alternatives. One investing platform brings art to mainstream investors in the form of fractional shares. Now you can own a portion of art, without needing tens of millions to purchase it outright. To learn more, click here. *See important disclosures Consumer Riding high Uber Canada (UBER) customers in Ontario will soon be able to order cannabis online through the Uber Eats app in a first-of-its-kind partnership with dispensary Tokyo Smoke (CGC). Orders will be fulfilled within an hour of order placement, marking the ride-hailing giant's foray into the booming business. Canada legalized marijuana for adult use in 2018, with financial institutions and payment processors legally allowed to accept marijuana transactions. Note: For now, Uber won't be delivering the cannabis products. Users will have to pick up the orders at one of Tokyo Smoke's 56 locations in Ontario (the Uber app will verify a person's age, while staff will check ID when a customer arrives). Uber has also been thinking about how it will enter the U.S. cannabis industry, which is forecast to hit $29B in annual sales by the end of this year. Back in April, CEO Dara Khosrowshahi commented on those plans, announcing that the company was waiting for government legalization to enter the American market. "When the road is clear for cannabis, when federal laws come into play, we're absolutely going to take a look at it," he said during an interview with CNBC. Go deeper: Canada's illegal weed market still takes in more than 40% of all non-medical marijuana sales, meaning there's plenty of room for growth for law-abiding corporations.       On The Move Lira low Emerging markets are on watch after the Turkish lira suffered one of its worst days since a currency crisis in August 2018. The freefall was prompted by comments from President Recep Tayyip Erdogan, who praised a third consecutive monthly interest rate cut and asserted that his country was fighting an "economic war of independence." Erdogan believes in an unorthodox approach that higher rates cause inflation, rather than prevent it, but despite the beliefs the annual figure reached nearly 20% in October. By the numbers: The lira plunged as much as 8.8% and broke through the symbolic threshold of 12 to the dollar, hitting an all-time low of 12.50. The currency is down almost 40% against the greenback this year and has fallen for the last 10 days in a row. Over the last two years, Erdogan has fired three central bank chiefs due to disagreements over monetary policy. In his latest speech, he contended that Turkey would not give in to "opportunists" and "global financial acrobats" that are calling for rate hikes. Instead, his government is prioritizing growth to boost investment, production, exports and employment. "That's why we pay no attention to the clamor of the doomsayers," he declared.

Commentary: "It's a dangerous game the Turks are playing," noted Uday Patnaik, head of emerging-market debt at Legal & General Investment Management. "As people lose faith in the value of the currency, you could see a potential run on the banks. This would be hugely problematic, we haven't seen that yet as far as I know." Turkey has already spent billions of dollars to support the lira, and interventions could return again if investors continue to pull funds from developing markets.

     

Today's Markets

In Asia, Japan closed. Hong Kong -1.2%. China +0.2%. India +0.3%.
In Europe, at midday, London flat. Paris -0.7%. Frankfurt -0.2%.
Futures at 6:20, Dow flat. S&P -0.1%. Nasdaq -0.3%. Crude -1.2% at $75.83. Gold -0.7% at $1794.10. Bitcoin -2% at $56112.
Ten-year Treasury Yield +2 bps to 1.65%

Today's Economic Calendar

8:55 Redbook Chain Store Sales
9:45 PMI Composite Flash
10:00 Richmond Fed Mfg.
11:30 Results of $24B, 2-Year FRN Auction
1:00 PM Results of $59B, 7-Year Note Auction
1:00 PM Money Supply

Companies reporting earnings today »

What else is happening...

Zoom (NASDAQ:ZM) sees revenue growing at slower rate in months ahead.

Payment stocks slump amid COVID worries, regulatory outlook.

Authentic Brands (AUTH) abandons IPO, sells $12.7B stake to private investors.

AT&T (NYSE:T), Verizon (NYSE:VZ) gain in wake of big telecom merger deals.

Health tech boom... H&F and Bain Capital to acquire athenahealth for $17B.

Tesla (NASDAQ:TSLA) Model S Plaid set to hit China around March.

American Airlines (NASDAQ:AAL), JetBlue (NASDAQ:JBLU) push for antitrust suit to get tossed.

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