Stocks gain with dollar on Powell Fed nomination

U.S. stocks advanced and Treasuries stretched losses on news President Joe Biden was set to nominate Jerome Powell for a second term at the head of the Federal Reserve.

U.S. stocks advanced and Treasuries stretched losses on news President Joe Biden was set to nominate Jerome Powell for a second term at the head of the Federal Reserve. 

The S&P 500 and the Nasdaq 100 each added 0.4 per cent. The Treasury curve flattened with the two-year yield jumping to 0.56 per cent. The U.S. swaps market is now pricing in a full 25 basis point rate hike into the June Fed meeting. The dollar rose to highs of the day while gold slumped. 

Biden had been considering between Powell or going and Lael Brainard, who he nominated to move up to Vice Chair. The Powell choice comes amid growing concern the U.S. central bank may fall behind the curve in combating sticky inflation. Consumer-price growth is surging at the fastest pace in decades and expectations for price growth are at the highest since 2013.

Shares got a lift overnight from a flurry of potential deals. Vonage Holdings Corp. jumped more than 20 per cent Ericsson agreed to buy it. Telecom Italia SpA jumped as much as 30 per cent in Europe after KKR & Co. bid for it. European stocks fell as concern mounted that a resurgent pandemic would hamper the economic recovery.

U.S. stocks are trading near record levels, outpacing the rest of the world, as investors see few alternatives amid rising inflation and a persistent pandemic that undermines global recovery. Concerns about high valuations and the potential for the economy to run too hot on the back of loose monetary and fiscal policies have interrupted, but not stopped the rally.