U.S. stocks moved lower on Friday after Donald Trump nominated former Federal Reserve governor Kevin Warsh to lead the Federal Reserve, a choice widely viewed by investors as leaning hawkish.
Market participants expect Warsh to favor lower interest rates, but not the aggressive easing that had been associated with some alternative candidates. His appointment will still require Senate approval. At the same time, stronger-than-expected producer price data for December reinforced concerns that inflation pressures could re-emerge in the months ahead.
“There is a general sense of hawkishness following the emergence of Kevin Warsh’s name,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank. She noted that Warsh is seen as less dovish than other contenders and more likely to support fewer rate cuts, although the Fed’s leadership structure should not override its core policy mandate.
Despite near-term jitters, investors continued to price in at least two 25-basis-point interest rate cuts by the end of 2026. Earlier this week, the Fed kept rates unchanged, pausing an easing cycle that has underpinned U.S. equities.
Stock futures weakened overnight, while the U.S. dollar and Treasury yields climbed on Thursday after media reports indicated the White House was preparing to nominate Warsh as the next Fed chair.
By 09:39 a.m. ET, the Dow Jones Industrial Average fell 113.32 points, or 0.23%, to 48,958.24. The S&P 500 declined 14.11 points, or 0.20%, to 6,954.90, while the Nasdaq Composite lost 61.97 points, or 0.27%, to 23,621.32. The rate-sensitive Russell 2000 slipped 0.3%.
Meanwhile, the CBOE Volatility Index, often referred to as Wall Street’s fear gauge, rose 0.32 points to 17.2.
Small caps shine as earnings season unfolds
Corporate earnings remained in focus. Microsoft posted its worst session since March 2020 on Thursday after cloud revenue disappointed, sparking a broader technology selloff. Its shares edged down a further 0.1% on Friday.
Apple fell 1.8% despite forecasting revenue growth of up to 16% for the March quarter, warning that rising memory chip costs were starting to weigh on margins.
Wall Street has largely recovered from recent bouts of volatility linked to Trump’s plans regarding Greenland and a mixed set of quarterly earnings results. Recently, concerns that the artificial intelligence trade has become crowded have driven a rotation into small-cap stocks and other less-favored areas of the market.
The Russell 2000 is on track to end the month nearly 7% higher, while the S&P 600 is heading for gains of more than 6%. By comparison, the S&P 500 and Nasdaq are each up just over 1.8% for the month. The Dow is poised to record its ninth straight monthly gain, its longest winning streak since 2018.
Earnings results have been broadly supportive. Of the 133 S&P 500 companies that have reported so far, about 74% have beaten analysts’ expectations, according to data from LSEG.
Among individual movers, SanDisk shares surged nearly 20% after issuing a stronger-than-expected third-quarter outlook on rising AI-driven storage demand. KLA Corp beat profit and revenue forecasts, but its shares dropped 7.7%.
Verizon climbed 7% after forecasting stronger annual profit, while American Express slipped 2.5% despite issuing an upbeat profit outlook. In the energy sector, Chevron gained 1% after posting better-than-expected fourth-quarter profit, while Exxon Mobil fell 1% despite beating estimates.
U.S.-listed gold and silver miners declined sharply after bullion prices dropped more than 5% and silver slid 11%. As a result, the S&P materials sector led market losses, falling 1.3%.
