Biden Taps SPR To Tame Oil Prices, Stocks Mixed As Rate Hike Bets Accelerate On Powell Nomination
U.S. stocks traded mixed Tuesday, although volumes are beginning to thin ahead of the Thanksgiving holiday break, as investors re-set interest rate expectations following President Joe Biden's decision to name Jerome Powell to a second term as Federal Reserve Chairman.
Oil prices were also in focus after the White House unveiled plans to release 50 million barrels of crude from the Strategic Petroleum Reserve --- as part of a coordinated move with China, India, South Korea, Japan and the United Kingdom -- in an effort to tame surging energy costs.
Powell's nomination, alongside prospective Vice Chair Lael Brainard, has boosted bets on both a near-term acceleration of the Fed's tapering strategy, as well as those linked to a 2022 rate hike, in the face of the fastest pace of domestic inflation in more than three decades.
That's lifted the dollar index, which tracks the greenback against a basket of six global currencies, to its highest levels in 16 months, while bumping benchmark 2-year note yields to a March 2020 high of 0.624% in ealry New York trading. The CME Group's FedWatch tool now suggests a 78% chance of a June rate hike, up from around 65% a week ago. Chances of a May hike are now at 60%.
On Wall Street, the Dow Jones Industrial Average gained 22 points in the opening hour of trading, while the S&P 500 dipped 5.5 points and the tech tech-focused Nasdaq Composite fell 80 point dip as benchmark 10-year Treasury note yields climbed to 1.65% ahead of a seven-year note auction later in the session.
In the oil markets, WTI futures contracts for January delivery, which are tightly corelated to U.S. gas prices, were marked $1.14 higher from last night's close at $77.90 per barrel following news of the SPR release.
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Brent crude contracts for January, the global pricing benchmark, rose $1.44 to $81.14 per barrel.
In terms of individual stocks, Zoom Video Communications (ZM) - Get Zoom Video Communications, Inc. Class A Report slumped 16.2% as growth concerns offset stronger-than-expected third quarter earnings and a robust full-year sales outlook.
Xpeng (XPEV) - Get Xpeng Inc Report shares jumped 11.75% after the China-based electric carmaker, and upstart Tesla (TSLA) - Get Tesla Inc Report rival, posted stronger-than-expected third quarter earnings and said year-end deliveries would top Street forecasts.
Best Buy (BBY) - Get Best Buy Co., Inc. Report tumbled 15.2% after it posted stronger-than-expected third quarter earnings but forecast weaker same-store sales over the holiday period as supply chain disruptions ripple through into the retail electronics sector.
Dollar Tree (DLTR) - Get Dollar Tree, Inc. Report shares gained 4.4% after it posted third quarter earnings hat were largely in-line with Street forecasts, noting it plans to rollout price increases that will take its midpoint to $1.25 early next year.
In overseas markets, Europe's Stoxx 600 was marked 0.82% lower by mid-day trading in Frankfurt, pulling the regional benchmark to a three-week low, amid ongoing concerns over the rise in coronavirus infection rates and the prospect of tighter monetary policy from the European Central Bank.
In Asia, the region-wide MSCI ex-Japan index was marked 0.45% lower on the session as stocks followed last night's sell-off on Wall Street, while the Nikkei 225 in Tokyo was closed for the nation's Labor Day Thanksgiving holiday.
