Stocks returned to highs by late afternoon Tuesday, Nov. 28, with the Dow Jones Industrial Average and S&P 500 on track to close at records.
The Dow increased 190 points on Tuesday, the S&P 500 gained 21 points, and the Nasdaq was up 22 points. A day earlier, the Dow closed just 10 points from its all-time closing high set on Tuesday, Nov. 21, while the S&P 500 missed out on recording back-to-back records after falling into the red.
Earlier in the session, Jerome Powell, Donald Trump's pick to serve as chairman of the Federal Reserve, indicated he would continue upon the path of monetary policy normalization in his testimony to the U.S. Senate Committee on Banking, Housing, and Urban Affairs on Tuesday.
In comments to Congress during his confirmation hearing, Powell said he expects to shrink the balance sheet, though expects the sum to remain greater than before the financial crisis. Powell expects to reduce the total over the next three to four years to roughly $2.5 trillion to $3 trillion, down from its current $4.5 trillion.
On the economy, Powell forecasts economic growth of 2.5% in 2018, level with the expected pace this year. He also said the low wage growth an low labor force participation among male workers showed there was still slack in the labor market. The unemployment rate sits at 4.1%, a level that on the surface indicates a tight labor market. Powell also remained uncertain on whether low inflation trends are transitory or a sign of something "more fundamental."
Trump picked Powell to replace Fed Chair Janet Yellen when her term ends in February.
In a statement released Monday, Nov. 27, Powell said, "We expect interest rates to rise somewhat further and the size of our balance sheet to gradually shrink."
Powell was careful to walk the line between dove and hawk, though: "While we endeavor to make the path of policy as predictable as possible, the future cannot be known with certainty. We must retain the flexibility to adjust our policies in response to economic developments."
Markets barely reacted to news of Powell's nomination in early November. Most analysts and economists expect Powell to continue on the path of steady tightening that Yellen has set up in the past couple years.
The Fed is set to meet on Dec. 12-13. The market is confident the Federal Open Market Committee will agree to a 25-basis-point rate hike at that meeting. Chances of an increase sit at 93%, according to CME Group fed funds futures.
The chances of the Senate tax bill's passage looked a little more certain after Trump met with Republicans to try to push for uniformity across the party. Shortly after, the Senate Budget Committee voted to advance the bill to a Senate floor later in the week -- two holdouts, Sen. Bob Corker and Sen. Ron Johnson flipped their votes in time for the bill to proceed.
The Senate GOP can only afford two nay votes from its own party. The Congressional Budget Office has calculated that the Senate's tax plan increases the federal deficit by more than $1.4 trillion through to 2027, a worry to fiscal hawks in the Republican party.
The Dow and S&P 500 briefly came off of highs on reports North Korea had fired off another ballistic missile, according to a South Korean news agency, ending a quiet period that stretched over recent months where the threat of conflict with the authoritarian nation eased. Earlier in the year, North Korea tested a number of missiles, some of which could be fitted with nuclear warheads.
The trade deficit widened at a faster pace than anticipated in October. The deficit came in at $68.3 billion last month, according to the Census Bureau, after a reading of $64.1 billion in September. Analysts anticipated a deficit of $64.8 billion.
Home prices rose at their fastest pace since June 2014, according to the S&P/Case-Shiller national index. The measure increased by 0.7% on a seasonally adjusted pace over the three months to September. On a 12-month basis, prices increased by 6.2%.
Consumer confidence in November again strengthened, a surprise to analysts looking for a slight dip this month. The Conference Board's measure rose to 129.5, up from 125.9 in October. Analysts expected the measure to fall to 124. Confidence has risen for five straight months and sits at its best level since November 2000.
"What is even better today is that consumer confidence back in November 2000 was actually coming down, while today's consumer confidence is still climbing," Wells Fargo analysts wrote in a note. "Not only is consumer confidence the highest in 17 years, it is also still improving compared to what was happening in November 2000."
Oil prices continued their retreat on Tuesday ahead of a meeting of Organization of Petroleum Exporting Countries on Thursday, Nov. 30. OPEC and non-OPEC producers will meet to discuss extending cuts beyond their March 2018 expiration date. Traders hope that the oil cartel and other countries can agree upon an extension, though Russia is widely considered a wild card at this point.
"We believe that the outcome of this meeting is much more uncertain than usual," Goldman Sachs analysts wrote in a note. However, the firm is optimistic a deal can be reached: "We view risks to oil prices as skewed to the downside this week as we believe that current prices, time spreads and positioning already reflect a high probability of a nine-month extension."
West Texas Intermediate crude was down 0.2% to $57.99 a barrel on Tuesday after falling by more than 1% on Monday.
Retailers weren't moving in any clear direction even after sales hit record levels on Cyber Monday. Early data indicates record revenues of $6.59 billion, surpassing the $5.03 billion brought in on Black Friday, according to Adobe. In the month so far, sales have risen roughly 16.8% and revenues could exceed $100 billion this holiday shopping season.
Buffalo Wild Wings Inc. (BWLD) rose by more than 6% after Roark Capital-backed Arby's agreed to buy the wings chain in a deal worth $2.9 billion, including debt. Roark offered $157 a share. The deal is expected to close in the first quarter of next year.
In other deal news, Emerson Electric Corp. (EMR) - Get Report has withdrawn an unsolicited bid to purchase Rockwell Automation Corp. (ROK) - Get Report after the latter showed "continued unwillingness" to engage in deal talks. Emerson had offered $225 a share for Rockwell, an offer it rejected as presenting "significant long-term risk for Rockwell Automation's shareowners." Emerson now plans to invest in share buybacks.
Updated from 2 p.m. ET, Nov. 28.
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