S&P 500 hits new all-time highs at 4,740 as investors celebrate Powell’s re-election

• The S&P 500 hit new all-time highs in the 4740s as investors applauded the re-election of Fed Chairman Powell.
• The Nasdaq 100 was initially higher, but the drop in growth names amid rising bond yields has pushed the index lower.

The American Stock Markets rallied to new all-time highs following the appointment of Fed Chairman Jerome Powell to a second term. The S&P 500 rose to 4,740 immediately after the 14:30 GMT US cash open, though it has since retreated to around 4,710, with daily gains of about 0.2%.

The Nasdaq 100 index, which also jumped higher at the open to almost touch 16,800 for the first time, has since slid back below 16,500 losing 0.5% on the day. The underperformance in the duration-sensitive index is not surprising given the sharp rise in US government bond yields in response to Powell’s appointment as Fed chairman. Duration-sensitive stocks, or Growth stocks are those whose valuation is based disproportionately on growth expectations of future earnings rather than current earnings, leaving this valuation sensitive to changes in bond yields. Higher bond yields increase the opportunity costs of holding growth stocks.

Less growth / duration sensitive stocks exposed to the Dow Jones Industrial Average Index rose 0.6%, boosted amid a sharp rise in bank names. The S&P 500 financial index rose nearly 2.0% on Monday, driven by the sharp rise in US bond yields.

Status-quo-stability

Markets applauded US President Joe Biden’s decision to select Powell for a second term as Fed chairman as he maintains the status quo at the bank regarding policy plans. According to Randy Frederick, managing director of trading and derivatives at Charles Schwab, “Markets like predictability … although Brainard may have been a good choice, markets would not know what to expect from her despite the general consensus being which meant lower rates for longer. “