Jerome Powell nominated to a second term as Chief of the Federal Reserve
President Biden nominated Jerome Powell to lead the Fed for another four years on Monday. The market was expecting this announcement, but rumors circulated the past few weeks that the President may consider another candidate for the role. Powell is expected to have a smooth Senate confirmation process as he is the current head of the Fed and Senate Republicans are expected to vote in favor of confirmation. Powell has had bipartisan support in his first term as Fed chairperson.
President Biden issued a written statement where he commented on Powell, “I’m confident that Chair Powell and Dr. Brainard’s focus on keeping inflation low, prices stable, and delivering full employment will make our economy stronger than ever before.”
Powell also has pledged to combat inflation to “use our tools.” Powell stated the Fed knows higher inflation is taking a toll on families, particularly those with less discretionary income to pay for higher food, housing and transportation costs. President Biden also nominated Lael Brainard as Vice Fed Chairperson. 2 Brainard will replace Richard Clarida as the Vice Chair and her nomination is subject to Senate confirmation.
John Deere posts record profits
In the face of a five-week worker strike, John Deere (DE) posted record annual income on Wednesday. The company also predicted that the next fiscal year would be another record setting year. Annual net income for John Deere came in at a record of $6 billion compared to $2.8 billion for the previous year. Members of the United Auto Workers were on strike from October 14 - November 17. The union members had rejected two tentative agreements that were reached between the company and the union. Last week, the union members ratified an agreement that the company presented. The agreement had an immediate 10% raise, an $8,500 signing bonus and two other 5% raises over the life of the contacting three lump sum payments equal to 3% of annual wages and a cost of living amusement to protect workers if there is future inflation. CEO John May stated, “Our results reflect strong end-market demand and our ability to continue serving customers while managing supply-chain issues and conducting contract negotiations with our largest union.” Shares of DE were up over 5% in trading on Wednesday on trading that was more than 2.5 times the normal share volume.
Best Buy shares tank on earnings and organized theft
Shares of BBY were down over 12% in heavy trading on Tuesday after the company reported earnings and disclosed losses to organized retail theft. Adjusted earrings were $2.08 billion compared to analyst estimates of $1.96 billion and sales were $11.9 billion compared to expectations of $11.7 billion. Gross margins also ticked down .1% to 23.5. The company reported a same store sales increase of 2% and a decrease of 10% in domestic online revenue.
In a call with analysts, CEO Corrie Barry stated, “We are seeing more and more particularly organized retail crime. You can see that pressure in our finances, and more importantly, frankly, you can see that pressure with our associates. It’s traumatizing.”
There have been reports of organized theft hitting a variety of retails in the past few weeks. Many of these events are called “Flash Robs” where people converge on a retailer and engage in a coordinated action of theft. The latest example was a California Nordstrom that was ransacked by up to 80 people wearing ski masks. Earlier in the month, it was reported that 14 masked men robbed a Chicago Area Louis Vuitton store. Best Buy shoppers can expect to see security guards and more merchandise locked up behind counters in certain locations. CEO Corrie Barry also warned that rising thefts could affect employee retention.
United States to release 8% of Strategic Petroleum Reserves
In an effort to counter the OPEC+ cartel, the United States has led a group of nations into releasing oil from strategic reserves in a coordinated effort to keep crude prices down. On Tuesday, President Biden announced the largest release of strategic petroleum reserves in the history of the United States. The US will release 50,000,000 barrels from the 621,000,000 barrels of oil that it stockpiled. There have been several drawdowns since the SPR was created in the mid 1970s. This is the largest release of crude since the SPR was established. According to the President, the drawdown is being made to keep fuel prices down at at time when many Americans are expected to travel.8 In addition to the US relating crude from the SPR the nations of China, Japan, India, South Korea and the United Kingdom would participate in the coordinated action. A total of 66,000,000 barrels of crude is expected to hit the market in January and February due to crude being released from the reserces. The OPEC+ cartel is meeting next week and the world energy markets are awaiting the OPEC+ response. Some of the OPEC+ delegates made comments this week that the cartel may hold back production increases planned in January as retaliation. It was expected that OPEC+ would bring 400,000 more barrels of crude production online in January under previously announced plans.
- Biden Keeps Powell as Fed Chief, Names Brainard Vice Chair. Bloomberg. Nov. 22, 2021.
2. Fed's Powell, Brainard Stress U.S. Inflation Battle is Priority. Bloomberg. Nov. 22, 2021.
3. John Deere posts record profit despite strike. CNN. Nov. 24, 2021.
4. Best Buy tumbles as Increased Theft Worsens Margin Squeeze. Bloomberg. Nov. 23, 2021.
5. Nordstrom Latest Hit by Flash Mob Robberies Targeting Louis Vuitton, Designer Stores. Newsweek. Nov. 21, 2021.
6. Louis Vuitton Stores Stung by Robberies, Losing Hundreds of Thousands in Merchandise. Newsweek. Nov. 19, 2021.
7. Best Buy CEO says the trauma from rising retail thefts could force employees to quit. CNBC. Nov. 23, 2021.
8. The Data Point: Biden’s oil reserve release is the biggest in U.S. history. CNN. Nov. 24, 2021.
9. China is joining the US and other countries in tapping emergency oil reserves. CNN. Nov. 23, 2021.
10. Oil Steadies After OPEC Says Reserves Release Will Bloat Surplus. Bloomberg. Nov. 25, 2021.
About the Writer
My name is Allen Spence and I have been working in the retail brokerage industry for over 16 years. I joined Alpaca in March of 2021 and am now the Manager of Alpaca Trading Services. Before joining Alpaca I have worked in a retail branch environment, call center for active traders, and spent over seven and a half years as the team lead on an equity trading desk for a large regional broker dealer. I’m excited to be at Alpaca helping bring the markets to investors worldwide. I live in Florida and enjoy traveling and spending time with my family.
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