Stocks fluttered around break-even territory in trading Thursday as investors digested a raft of economic news, including Jerome Powell’s nomination to be the next chair of the Board of Governors of the Federal Reserve System as well as the release of the House Republicans’ long-awaited tax proposal and an interest rate hike by the Bank of England.
The Dow Jones industrial average dropped 80 points early in the day but climbed well into positive territory and closed the day up 81 points at 23,516. The Standard & Poor’s 500-stock index and the Nasdaq were around break-even.
“We’ve got all kinds of stuff going on,” said Chris Gaffney, president of EverBank World Markets. “The Powell announcement was expected. I don’t think we will get much movement there, especially with all the chatter we have seen already.”
President Trump announced the Powell nomination Thursday afternoon in the Rose Garden.
Gaffney said the Bank of England interest rate increase of a quarter point was not a surprise. And the GOP tax plan has a long road of revisions ahead. He said the more important news will be Friday’s non-farm jobs report from the U.S. Department of Labor.
“That would tell me about the health of the economy,” Gaffney said.
A busy earnings season continued as well, with Facebook reporting increased profit. The company’s shares declined 2 percent Thursday as it and fellow social media giants Twitter and Google came under scrutiny on Capitol Hill over security concerns relating to Russia’s interference in U.S. politics.
Kraft Heinz struggled most of the day before eking out a 33 cent gain. Apple reported robust profits following the market close and the company is closing in on a $1 trillion market capitalization. The company is launching its iPhone X on Friday.
The two-pronged news of Powell’s appointment and the GOP corporate tax reform plan was front and center, but markets barely noticed.
“This is pretty normal noise,” said Brad McMillan, chief investment officer at Commonwealth Financial Network. “The big question is the tax reform bill. Everybody is looking at that and trying to figure out exactly what it means, who are the winners, who are the losers.”
The ascension of Powell, who has been a member of the Board of Governors of the Federal Reserve since 2012, to succeed Federal Reserve Chair Janet Yellen did not jolt markets.
“Jay Powell is a vote for more of the same,” McMillan said. “The markets generally like more of the same.”
“Jay Powell’s entire credibility as a central banker was gained by working with the Yellen consensus at the Fed,” said Peter Conti-Brown, a financial historian and assistant professor at the Wharton School at the University of Pennsylvania. “If there is daylight between Jay Powell and Janet Yellen, we haven’t seen it. The idea of continuity between the Yellen Fed, whose monetary policy is correlated with the bull market, will be welcomed by that same market.”
Powell, 64, is an attorney who served in the Treasury Department under President George H.W. Bush. He attended Georgetown University Law, where he was editor-in-chief of its Law Journal.
He also worked from 1997 to 2005 at the Carlyle Group, the Washington-based private-equity giant. Powell was a managing director and partner, and he headed the industrial sector team. He was also a member of Carlyle’s U.S. Buyout Investment Committee. His deals included the Dr Pepper/7Up bottling group.
“Jay Powell is a thoughtful, consensus builder who understands Wall Street and Main Street well,” Carlyle said in a statement. “We wish him much success in this important new role serving our country.”
Goldman Sachs issued a report Thursday saying Powell’s appointment “should preserve continuity at the Fed, as his stated economic and monetary policy views largely mirror those of the current leadership.
“Powell thinks the economy is at full employment, views inflation as ‘kind of a mystery’ but expects it to rise, and supports gradually raising rates if the economy performs as expected,” according to the Goldman report.
“He is a balanced, thoughtful guy,” said Michael Farr, president of the D.C. money management firm of Farr, Miller & Washington. “He’s neither a hawk nor dove. He’s a pragmatist who will pursue an economic good and turn a deaf ear to politics. In 2011, he published a study showing exactly how much money it cost the U.S. Government to function on a daily basis. It was specific for the months of September through December that year. It was really cool, and the first time I’d seen anything that granular.“
Powell, an attorney, “would be the first Fed Chair in decades to not hold a PhD in economics,” Farr said. “The Federal Reserve is overrun with PhD economists. A lawyerly perspective may be quite helpful.”