Investing.com — Wall Street is seen starting the new week on a positive note as investors digest the likely appointment of Scott Bessent as the new Treasury Secretary. The retail sector will be in focus ahead of the Thanksgiving holiday, while Italian banking giant UniCredit seeks another acquisition.
1. Bessent nominated as US Treasury Secretary
President-elect Donald Trump nominated fund manager Scott Bessent to be his incoming US Treasury Secretary on Friday, and the decision has been generally received favorably given he’s seen as a mainstream candidate rather than an unknown.
Bessent has spent his career in finance, working for macro investment billionaire George Soros and noted short seller Jim Chanos as well as founding Key Square Group, a global macro investment firm. He was an economic advisor for Trump’s 2024 presidential campaign.
In an interview with the Wall Street Journal, published on Sunday, Bessent indicated he will prioritize delivering on election tax cut pledges, including making Trump’s first term tax cuts permanent, as well as eliminating taxes on tips, social-security benefits and overtime pay.
Bessent said, in the interview, that he would also focus on enacting tariffs, although has also said they should be objectives “layered in gradually”, while the levels of tariffs being mentioned, such as 60% on Chinese goods, were “maximalist” positions that might be watered down.
In various media appearances he has talked of cutting the budget deficit to 3% of GDP and dealing with the mountain of U.S. debt, largely by slashing spending.
That said, the amount of discretionary spending there is to cut is trivial compared with the essential stuff such as Medicare and defence.
US bond yields fell after his appointment, dragging the dollar lower, while stock index futures climbed on Wall Street.
2. Futures set for positive start to week
US stock futures rose Monday, continuing the previous week’s positive tone ahead of Thursday’s Thanksgiving holiday.
By 03:45 ET (08:45 GMT), the Dow futures contract was up 260 points, or 0.6%, S&P 500 futures climbed 25 points, or 0.4%, and Nasdaq 100 futures rose by 90 points, or 0.4%.
The main benchmarks posted positive weeks last week, with the Dow Jones Industrial Average advancing around 2% to finish at a record close. The broad-based S&P 500 and the tech-heavy Nasdaq Composite each rose about 1.7%.
The main economic focus this week will be Wednesday’s Personal Consumption Expenditures Price index, the Federal Reserve’s preferred gauge of underlying inflation.
Recent stubborn inflation data has seen the Fed take a cautious stance towards further interest rate cuts.
While the US is due to release November data on both consumer and producer prices before the Fed’s next meeting on Dec. 17-18 this will be the final PCE report before then.
3. Retail sector in spotlight
The retail sector will be in the spotlight this holiday-shortened week, with the US Thanksgiving holiday on Thursday and the following Black Friday marking the start of the holiday shopping season.
A fresh batch of retail earnings are also due in the coming days, starting later Monday with Bath & Body Works (NYSE:BBWI), while Best Buy (NYSE:BBY), Macy’s (NYSE:M), Nordstrom (NYSE:JWN) and Urban Outfitters (NASDAQ:URBN) all due to report this week.
Earnings results from two major retailers last week gave two very different perspectives. On Tuesday, Walmart (NYSE:WMT) raised its annual sales and profit forecast for the third consecutive time, while Target (NYSE:TGT) shares dropped sharply on Wednesday after it forecast holiday-quarter comparable sales and profit below estimates.
Investors are watching the extent to which inflation will weigh on buying habits, with consumer spending accounting for more than two-thirds of US economic activity.
4. UniCredit on acquisition march
The European banking sector received more merger and acquisition news Monday, after Italy’s UniCredit (BIT:CRDI) launched a surprise all-share offer worth €10 billion ($11 billion) for smaller domestic rival Banco BPM (BIT:BAMI).
The deal would, if completed, merge two of Italy’s largest lenders, with UniCredit stating that the purchase would allow the bank to “further strengthen its role as a leading pan-European banking group.”
UniCredit is also pursuing a potential deal with Germany’s Commerzbank (ETR:CBKG), although the German government has yet to bless the potential union.
UniCredit said on Monday the buyout offer for Banco BPM was independent of its proposed investment in Commerzbank.
Banco BPM bought 5% in bailed-out mid-sized rival Monte dei Paschi (MPS) earlier this month, a move seen as potentially paving the way for an eventual combination as the state pulls out of MPS entirely.
The European banking sector has been considered ripe for consolidation for years, with cash-rich UniCredit often cited as a possible acquirer.
5. Crude start new week on back foot
Crude prices retreated Monday, handing back some of last week’s hefty gains, on increasing hopes for a ceasefire in the troubled MIddle East, an oil-rich region.
By 03:45 ET, the US crude futures (WTI) dropped 0.7% to $70.73 a barrel, while the Brent contract fell 0.7% to $74.14 a barrel.
Israel and Hezbollah were close to signing a ceasefire agreement to end hostilities in Lebanon, Axios reported on Sunday, citing Israeli and US officials.
Israel daily The Times of Israel also reported that Prime Minister Benjamin Netanyahu was holding high-level talks over the deal, which was brokered by US officials.
The prospect of an Israel-Hezbollah ceasefire points to lessening tensions in the Middle East, presenting a lower risk premium for oil.
Both contracts gained around 6% last week, notching their biggest weekly gains since late September to reach their highest settlement levels since Nov. 7.
