Big surprise. President Donald Trump made no waves with his pick for Federal Reserve chair. As expected, Trump named Jerome Powell as his nominee on Thursday afternoon, Nov. 2, a widely expected decision that served to shore up gains on the Dow Jones Industrial Average. 

The Dow rose 0.35% to secure a record close of 23,516.26 on Thursday. The S&P 500 rose 0.02% and the Nasdaq dropped by 0.02%. 

If confirmed by the Senate, Powell will take over from current Chair Janet Yellen, who has held the seat since 2014, when her four-year term expires in February 2018. Yellen oversaw the Fed's slow-and-steady move away from near-zero rates and toward normal monetary policy.

Powell has been a member of the Fed's board of governors since 2012 and was widely expected to be named as Trump's pick. In his five years on the board, Powell has largely supported Yellen's moves, which has led markets to believe he will continue to normalize monetary policy at the same pace as his predecessor. 

"In terms of whether or not he's a hawk or a dove, the same could be asked of Chair Yellen, who was believed to never want a rate hike on her watch, but when conditions warranted it she emerged more hawkish than thought possible," said Quincy Crosby, chief market strategist at Prudential Financial. "Under Powell expect a pragmatic path on monetary policy, along with an equally pragmatic path on industry regulation. In other words, continuity with a Republican tilt."

Trump's pick is nontraditional in that new presidents have largely reappointed sitting Fed chairs for a second term. Most recently, former president Barack Obama reappointed George W. Bush pick, Ben Bernanke, before nominating Yellen in late 2013. 

 

On Wednesday, Nov. 1, the central bank decided to leave the federal funds rate unchanged at 1% to 1.25%, a widely expected decision following a two-day meeting. The chances of a hike at the December meeting increased to 96%.

Members of the Federal Open Market Committee, the Fed's monetary-policy arm, said that U.S. economic strength warrants gradual rate increases although inflation remains below a 2% target. Disruptions from recent hurricanes shouldn't affect long-term growth, members said.

House Republicans have proposed major tax-reform changes, designed to permanently cut the corporate tax rate and, they say, lift some of the tax burden off of the middle class.

Among the changes in "The Tax Cuts and Jobs Act" bill released by the House Ways and Means Committee on Thursday is lowering the rate for "pass-through" businesses to 25% and reducing the corporate tax rate to 20% from 35% on a permanent basis, refuting earlier reports that the cuts would be a temporary one. The bill also allows write-offs for equipment investments and gives tax credits for research and development.

The $1.51 trillion tax plan cuts the number of personal tax brackets to three -- 12%, 25%, and 35% -- from seven, though it keeps a top rate of 39.6% for high earners. A single with income of $24,000 or less will pay no income tax, the 12% bracket will apply to income up to $90,000, the 25% bracket to income up to $260,000, and the 35% levy to income up to $1 million. The plan also proposes increasing a child tax credit by $600 to $1,600, and leaving 401(k) contribution amounts unchanged.

Changes to how much Americans can deduct on their mortgages came as one of the largest shocks, sending homebuilder stocks into a tailspin. House Republicans propose that Americans can take the deduction only on mortgages of $500,000 or less, a cut from the current level of up to $1 million, according to The Wall Street Journal.

D.R. Horton Inc. (DHI) , Toll Brothers Inc. (TOL) , Lennar Corp. (LEN) , and Hovnanian Enterprises (HOV) were sharply lower. Home Depot Inc. (HD) was the biggest weight on the Dow. The S&P Homebuilders SPDR ETF (XHB) slumped 2.5%.

The House Ways and Means Committee will meet on Monday, Nov. 6, to begin the process of finessing the legislation before bringing it to the House floor for a vote.

Facebook Inc. (FB) shares fell 2% on Thursday after the social media giant warned that its profitability would be affected by ongoing investments in security. Facebook and other tech giants have testified before Congress this week about the role their platforms and services played in Russian interference in the U.S. presidential election.

"Our community continues to grow and our business is doing well," wrote CEO Mark Zuckerberg. "But none of that matters if our services are used in ways that don't bring people closer together. We're serious about preventing abuse on our platforms. We're investing so much in security that it will impact our profitability. Protecting our community is more important than maximizing our profits."

Facebook is a holding in Jim Cramer's Action Alerts PLUS Charitable Trust Portfolio. Want to be alerted before Cramer buys or sells the stock? Learn more now.

Facebook reported third-quarter earnings of $1.59 a share, well ahead of estimates of $1.28, while revenue in the quarter jumped 47% from a year earlier to $10.3 billion.

Tesla Inc. ( TSLA)  tumbled 6% after the electric carmaker missed earnings estimates and pushed out some of CEO Elon Musk's ambitious production targets. For the quarter, Tesla posted an adjusted loss of $2.92 a share, substantially wider than the shortfall of $2.31 that analysts had expected. Revenue of $2.98 billion exceeded the consensus call of $2.95 billion.
 
Tesla said it expects production of the up-market Model S and Model X SUV to drop 10% from the third quarter to the fourth quarter, as it shifts workers to Model 3 production. Musk already had warned investors in early October that Model 3 production would come in well below expectations. The company churned out just 222 Model 3s in the third quarter, in line with Tesla's October guidance but well below the 1,500 the company had previously expected.

DowDuPont Inc. (DWDP) topped profit and sales estimates over its recent quarter and also announced plans to implement job cuts. The recently merged company earned an adjusted 55 cents a share, above consensus of 42 cents. Pro forma sales gained 8% to $18.29 billion, exceeding expectations. DowDuPont hopes to reach $3 billion in cost savings through restructuring. The company reported a $180 million third-quarter charge tied to those plans and expects a $1 billion charge over the fourth quarter. 

DowDuPont is a holding in Jim Cramer's Action Alerts PLUS Charitable Trust Portfolio. Want to be alerted before Cramer buys or sells the stock? Learn more now. 

Heavy-hitters with earnings out after the bell include Apple Inc. (AAPL) , Alleghany Corp. (Y) , American International Group Inc. (AIG) , CBS Corp. (CBS) , Chemours Co. (CC) , Starbucks Corp. (SBUX) , and Western Union Co. (WU) . 

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Around 77% of S&P 500 companies have reported earnings so far this reporting season. Of those, 73% have exceeded profit estimates, and 67% have beaten revenue forecasts. Economists anticipate blended earnings growth of 7.7%, or 5.3% excluding energy, according to Thomson Reuters.

Weekly jobless claims declined in the past week, while monthly unemployment claims hit their lowest level since April 1973. The number of new claims for benefits declined by 5,000 to 229,000 in the past week. The less volatile four-week claims average fell by 7,250 to 232,500. 

A report on productivity and costs showed increases mostly across the board over the third quarter. Quarterly productivity in the U.S. rose by 3%, its best increase in three years, while output increased 3.8%. Hours worked rose by 0.8% and unit labor costs increased 0.5%. Manufacturing productivity tumbled, though, falling by 5% over the third quarter. 

The U.S. jobs report is set for release on Friday, Nov. 3. Investors expect a solid rebound on nonfarm payrolls in October after the first contraction in seven years in September. Consensus is for 310,000 jobs to have been added to the U.S. economy and for the unemployment rate to hold at 4.2%, according to FactSet. Year-over-year hourly earnings are expected to have increased 2.7%.

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