Daily Market Color

Powell Confirmation Hearing, Senate Tax Progress Pace Financial Markets

Jeff Davenport

Financials Rally on Powell

Jerome Powell’s Fed Chair confirmation hearing before the Senate Banking Committee stood as the most impactful event during today’s trading session.  On the topic of a December rate hike, Powell commented that “the case for raising interest rates at our next meeting is coming together,” as “conditions are supportive of doing that.”  Fed fund futures are currently implying a 96% probability of a quarter point rate hike at the FOMC’s December meeting.  Speaking about the potential future regulatory change, he reinforced his previously-stated view that a further strengthening of financial laws is not needed and even more, the existing rules need to be revisited to ensure maximum efficiency.  “Honestly, I can’t really think of a place where we are lacking an important rule,” Powell stated.



All three major US stock indices finished 0.4% – 1.1% higher on the day, with financial stocks (+3.25%) receiving the biggest boost from Powell’s bank-friendly rhetoric.  Treasurys held within a tight range during the trading session, as the yield on the 10-year note held near 2.33%.  Financial markets were seemingly unaffected by North Korea’s continued disregard for UN and US warnings, as the rogue nation conducted yet another nuclear test this afternoon, firing an intercontinental ballistic missile which landed in the Sea of Japan.  It was the first launch by North Korea since September 15th and comes one week after President Trump’s decision to officially label North Korea as a state sponsor of terrorism.      



Senate Tax Bill Gains Momentum

This afternoon Republicans received a boost in confidence as the Senate Budget Committee voted 12-11 to advance the tax bill to the Senate floor.  Highlights of the Senate’s measure include a permanent reduction in the corporate tax from 35% to 20% (after a 1-year delay) and a lowering of individual tax rates, the combination of which are estimated by the CBO to add $1.4 trillion to the US budget deficit over the next 10 years.   The next vote could occur as early as this Thursday, at which time Republicans can only afford to lose 2 of their 52 votes in the Senate.


Jeff Davenport

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