U.S. stocks hit fresh record highs Monday, while Treasury yields jumped and the dollar extended gains, as investors reacted to President Joe Biden's decision to nominate Jerome Powell for a second term as Chairman of the Federal Reserve, with Lael Brainard pegged as Vice Chair.
Global market gains were capped, however, following comments from German Chancellor Angela Merkel, who cautioned that the recent COVID surge in Europe's biggest economy has become 'dramatic', and argued for tighter restrictions on movement and businesses in the weeks ahead.
Health Minister Jens Spahn was even more blunt, telling reporters in Berlin Monday that "by the end of this winter pretty much everyone in Germany ... will have been vaccinated, recovered or died."
With markets closed on Thursday, and trading for only a half day on Friday, liquidity is likely to be thin this week with only 12 S&P 500 companies reporting earnings and light economic calendar highlighted by minutes of the November Fed meeting on Wednesday afternoon.
Stocks are getting their early Monday boost, however, from the sustained strength of the third quarter earnings season, which is easing into its conclusion, as collective S&P 500 profits rise 42.3% from last year to $452.9 billion. Stronger-than-expected consumer spending data, as well as continued improvements in the labor market are adding to the bullish tone.
Inflation prospects, however, are showing few signs of abating, and the current rally -- which has taken the S&P 500 to a year-to-date gain of around 25.1% -- could be tested if the Fed were to accelerate its tapering plans in order to slow the searing pace of CPI gains.
Investors will get a glimpse into a least some of that thinking Wednesday with the release of minutes from the Fed's November policy meeting, as well as a reading of the PCE Price Index, the central bank's preferred measure of inflation, earlier that same day.
“While there’s still more to be done, we’ve made remarkable progress over the last 10 months in getting Americans back to work and getting our economy moving again," Biden said in a statement. "That success is a testament to the economic agenda I’ve pursued and to the decisive action that the Federal Reserve has taken under Chair Powell and Dr. Brainard to help steer us through the worst downturn in modern American history and put us on the path to recovery."
In terms of corporate earnings, only 12 S&P 500 companies are slated to report this week, highlighted by updates from retailers including Best Buy (BBY) - Get Best Buy Co., Inc. Report, Gap (GPS) - Get Gap, Inc. Report, Nordstrom (JWN) - Get Nordstrom, Inc. Report and Dollar Tree (DLTR) - Get Dollar Tree, Inc. Report. Deere & Co. (DE) - Get Deere & Company Report will also report on Wednesday.
On Wall Street, the Dow Jones Industrial Average gained 280 points in the opening minutes of trading, paced by gains in bank stocks, while the S&P 500 rose 36 points to a fresh record high.
The tech-focused Nasdaq Composite added 110 points from Friday's record high close -- and first over 16,000 points -- as benchmark 10-year Treasury note yields bumped to 1.587% in the wake of Biden's Fed decision.
Tesla (TSLA) - Get Tesla Inc Report shares jumped 3.9% higher in pre-market trading after founder and CEO Elon Musk said the Model S Plaid, the car-maker's high performance luxury sedan, will be made available in China early next year.
Activision Blizzard (ATVI) - Get Activision Blizzard, Inc. Report shares fell 1% in pre-market trading after the Wall Street Journal reported the CEO Bobby Kotick would consider stepping down if he isn't able to make meaningful changes to the video game maker's workplace culture.
Pfizer (PFE) - Get Pfizer Inc. Report shares, meanwhile, gained 0.33% after the drugmaker published impressive follow-up data from a late stage trial of its coronavirus vaccine in adolescents.
In overseas markets, Europe's Stoxx 600 was marked 0.07% lower by mid-day trading in Frankfurt following Merkel's comments on COVID restrictions while the the Asia region-wide MSCI ex-Japan index was marked 0.22% lower on the session. In Tokyo, the Nikkei 225 closed 0.09% higher at 29,774.11 points.
Global oil prices extend their recent decline amid reports that Japan will participate in a coordinated release of crude reserves initiated by President Joe Biden.
WTI futures contracts for January delivery were marked 11 cents lower at $75.83 per barrel while Brent contracts for the same month fell 18 cents to $78.71 per barrel.