Stocks were volatile on Monday as President Joe Biden announced that he would renominate Jerome Powell as Fed chair, stamping his approval of the central banker who has guided the U.S. economy through the depths of the Covid-19 pandemic.
The competition for Fed chair appeared to be between the incumbent Powell and Fed Governor Lael Brainard, who was favored by some progressives in Congress. In tapping Powell to serve another term and nominating Brainard to vice chair, Biden appears to have threaded the needle between pleasing markets and Capitol Hill.
"We expect this pair to win quick Senate confirmation, and we view this decision as a market positive, especially for banks," Ed Mills, Washington policy analyst at Raymond James, said in a note to clients. "The markets have been comfortable with Powell and have considerable confidence in his leadership, especially given his stewardship through the COVID crisis."
"Going forward, there are considerable challenges for the Fed, but [Powell's] leadership will be viewed as more market-driven, rather than politically-driven (a market concern we had heard with a potential Brainard-led Fed)," Mills added.
The initial winner from Biden's decision appeared to be bank stocks. The prospect of rising interest rates helped lift stocks like JPMorgan and Goldman Sachs more than 2%. Those names also benefited from the fact that Brainard – who is viewed as more aggressive on regulation – was passed over for the top job at the central bank.
