Dow soared 418, advancers over decliners 3-1 & NAZ went up a modest 46. The MLP index was off 2+ to the 302s & the REIT index jumped 4+ to the 434s on lower interest rates. Junk bond funds continued to be in demand & Treasuries saw unusually high demand which resulting in yields plunging (more below). Oil sank 2+ to the high 68s & gold plunged 86 to 2625.
Dow Jones Industrials
The stock market appeared to cheer Pres-elect Donald Trump's presumptive nominee for Treasury secretary, who said earlier in Nov that he sees an era of strong growth & lower inflation ahead. Stock market futures rose & Treasury yields tumbled following the announcement late Fri that Trump would pick Scott Bessent, a familiar figure, to take on his administration's most important economic role. The move sent a message that Trump wants someone with strong market credentials as well as a similar philosophy for the role. “This pick should please markets given Bessent’s in-depth understanding of financial markets and the economy – in particular the bond market the Trump administration will need to keep on [its] side if it is to advance its agenda successfully,” Sarah Bianchi, Evercore ISI’s chief strategist of intl political affairs & public policy, & colleagues wrote in a note. Bianchi added that markets “couldn’t have done much better” than Bessent. Since Trump's victory earlier this month, in which he also carried a red wave that flipped the Senate to Reps & retained GOP control of the House, markets have been mostly positive, albeit volatile. In particular, bond yields have scaled higher, with some interpreting the move as anticipating another leg up for inflation while others see it as traders pricing in stronger growth. Bessent said he expected the new pres's agenda to help bring down inflation while simultaneously stimulating growth. “The one thing he doesn’t want is a replay of what we’ve just got under Biden-Harris,” Bessent added. “President Trump has some very good ideas, but I guarantee you, the last thing he wants is to cause inflation,” he continued. “I don’t think the bond market is worried about Trump 2.0 inflation. I think what you’re seeing is a healthy move geared toward a growth impetus.”
U.S. stock and bond markets love Trump’s pick of Bessent for Treasury — here’s why
Treasury yields retreated as investors weighed Pres-elect Donald Trump's Treasury secretary pick & eyed a key inflation reading due later in the week. The 10-year Treasury yield slid more than 14 basis points at 4.267% & the 2-year Treasury lost nearly 9 basis points, sitting at 4.281%. 1 basis point is equal to 0.01% & yields & prices move in opposite directions. Trump's choice of hedge fund exec Scott Bessent as Treasury secretary has calmed investors' nerves about the future of the US economy. Bessent, the founder of Key Square Group, is expected to back the incoming pres's economic goals including gradual tariffs and pro-business policies. However, as an old stock market expert & a fiscal conservative, investors believe Bessent will prioritize stability in the US economy& markets. “The nomination of Scott Bessent to be U.S. Treasury Secretary has been a catalyst for lower bond yields, higher equity indices and a weaker dollar this morning,” Kit Juckes, chief FX strategist at Societe Generale, wrote. “His nomination was greeted positively by markets worried about the size of the U.S. budget deficit and the inflationary impact of tariffs,” he added. “Whether he can help get the U.S. to 3% GDP growth and a 3% budget deficit time will tell, but for now, he has changed the market mood, if nothing else.” “I guarantee you, the last thing [Trump] wants is to cause inflation,” Bessent said before he was picked. “I would recommend that tariffs be layered in gradually.”
Treasury yields fall as investors endorse Trump’s Treasury secretary pick, await inflation data
Chipmaker Intel (INTC), a Dow stock, & the CHIPS & Science Act office are close to finalizing a deal which would award the company a roughly $8B grant, according to a person familiar with the matter, as the Biden administration moves to dole out funds before Pres-elect Donald Trump's inauguration. That
$8B will go toward INTC's factory-building efforts. The Commerce Dept is expected to finalize the award in the
coming weeks. INTC is also in line for a $3B contract to manufacture chips for the Dept of Defense, a deal announced in Sep 8 a rare
bright spot in the company’s struggling efforts to grow its fab
business. INTC's struggles have intensified since the grant was initially announced. 4 people familiar with the matter, reported that the
gov had decided to decrease the grant by roughly $500M due
to uncertainties about INTC's ability to execute on its investment
commitment & because of INTC's shifting technology road map &
customer demand. The US awarded Taiwan Semiconductor Manufacturing. a $6.6B grant earlier this month,
raising investor expectations that cash funding for INTC would come
soon. INTC has benefited from CHIPS tax breaks but has not yet received
cash awards, something which CEO Pat Gelsinger has expressed
dissatisfaction with. “We’re frustrated that hasn’t moved faster,”
Gelsinger said, referring to the CHIPS grants. “They’ve
been too bureaucratic in that process. We’re anxious to see those
finished.” The stock rose 65¢.
Intel, Commerce close to finalizing roughly $8 billion CHIPS Act grant: Source
Israel is potentially days away from a cease-fire agreement with Lebanon's Hezbollah, the Israeli ambassador to the US said. Prices extended losses after Axios reported that Israel & Lebanon have accepted the terms of a ceasefire agreement, But the parties haven't yet announced an agreement, it said. Bullion tumbled as much as 3% as traders unwound positions built last week amid rising geopolitical tensions, which helped the metal register the biggest weekly rally in 20 months. Traders were also digesting Pres-elect Trump's pick of Scott Bessent for Treasury Secretary. It is seen as a measured choice that would inject more stability into the US economy & financial markets. The hedge fund manager's nomination has eased concerns over the incoming pres's inflationary agenda, which could reduce gold's allure as a hedge against price rises. Investors are now focused on the outlook for monetary policy, after a report showed US business activity expanding at the fastest pace since Apr 2022. Swaps traders see a less-than-even chance the Fed will cuts rates next month. Higher borrowing costs tend to weigh on gold, as it doesn't pay interest. A slew of data this week may yield clues on the Fed's likely rate path. These include minutes of the central bank's Nov meeting, consumer confidence & personal consumption expenditure data, the monetary authority's preferred gauge of inflation. Gold has still climbed roughly 30% this year, supported by central bank purchases & the Fed's pivot to rate cuts. Haven buying has also been a feature on an escalation in the Russia-Ukraine war. Spot gold fell 3.4% to $2619 per ounce, its biggest daily percentage decline since Jun & US gold futures settled 3.5% lower to $2618.
Gold Tumbles After Report Says Israel and Hezbollah Reach Deal
Oil dipped as Treasury Secretary nominee Scott Bessent pushed for increased US production & Israel said it's potentially days away from a cease-fire deal with Lebanon's Hezbollah. Brent crude fell below $75 a barrel after jumping almost 6% last week on increased geopolitical risks in Ukraine & Iran. Bessent advised Pres-elect Trump to push for Ms of barrels a day more of oil production or its equivalent. That push comes at the same time OPEC is set to decide on whether to add extra barrels to the market & the Intl Energy Agency forecasts a sizable supply surplus next year. Today, the Israeli ambassador to the US said that his nation is "close to a deal" with Hezbollah. Although it remains unclear if the Iran-backed group will accept an accord, the move reduced concerns about production from the Middle East, which supplies about a 3rd of the world's oil. Last week, oil was pushed higher as Russia's war in Ukraine escalated with the use of longer-range missiles by both sides, raising concern that crude flows could be affected. Cold weather & surging gas prices have also raised the prospect of higher diesel demand in Europe. Crude has traded in a range of about $6 a barrel since the middle of Oct, alternating between weekly gains and losses, as the threat to supply from geopolitical tensions & some improvements in physical markets is weighed against the prospects of oversupply. Banks expect the Organization of the Petroleum Exporting Countries to delay a planned increase for a 3rd time when they meet this weekend. Brent for Jan settlement fell 0.8% to $74.78 a barrel & WTI for Jan declined 0.9% to $70.81 a barrel.
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