NEW YORK/BENGALURU (Nov 22): The S&P 500 hit a record high on Monday after President Joe Biden picked Federal Reserve Chair Jerome Powell to lead the central bank for a second term, with Wall Street lenders rallying on the prospect of interest rate hikes in 2022.
But the Nasdaq lagged its peers, falling from record highs, as rising Treasury yields weighed on major technology stocks.
Powell's nomination was largely welcomed by investors hoping for no big changes in the Fed, as it guides the economy through a post-Covid recovery. The central bank is set to herald a return to pre-pandemic policy by end-2022.
Fed Governor Lael Brainard, who was the other top candidate for the job, will be vice chair, the White House said.
"Markets like predictability ... while Brainard may have been a fine choice, the markets would not know what to expect from her even though the general consensus was that it meant lower rates for longer," said Randy Frederick, managing director of trading and derivatives, Charles Schwab, Austin, Texas.
The S&P 500 banks sector jumped 2.8%, tracking a surge in Treasury yields as investors priced in policy tightening by the first half of 2022. Wells Fargo & Co led gains among major Wall Street banks, adding 3.7%.
"The message is that we're on a course to reduce tapering and we're headed towards higher interest rates, which will most likely going to be raised in the middle of next year, and I think Wall Street has already digested most of that," said Robert Pavlik, senior portfolio manager at Dakota Wealth Management.
"This is sort of another confirmation that the Fed has a plan."
Futures contracts tied to the Fed's policy rate indicated that money markets are now expecting the US central bank to raise interest rates by 25 basis points by next June versus a previous estimate of July.
At 11:46 a.m. ET, the Dow Jones Industrial Average was up 304.44 points or 0.86% at 35,906.42; and the S&P 500 was up 30.82 points or 0.66% at 4,728.78. The Nasdaq Composite was down 26.03 points or 0.16% at 16,031.41.
Investors were now awaiting a slew of economic data this week, including IHS business activity readings, personal consumption expenditure, and minutes of the Fed's latest meeting.
Among other movers, Apple Inc jumped 2.6% to a record high after J.P. Morgan flagged possible improvements to the supply of the iPhone 13 in coming months.
Tesla Inc gained 3.9%, after CEO Elon Musk tweeted that the Model S Plaid will "probably" be coming to China around March.
Activision Blizzard slipped 2.4% after a media report that the video game publisher's chief executive, Bobby Kotick, would consider leaving if he could not quickly address concerns over company culture.
Advancing issues outnumbered decliners by a 1.55-to-1 ratio on the NYSE. Declining issues outnumbered advancers for a 1.30-to-1 ratio on the Nasdaq.
The S&P index recorded 44 new 52-week highs and nine new lows, while the Nasdaq recorded 120 new highs and 404 new lows.