Nasdaq, Dow, and S&P 500 All Dip on Federal Reserve Chair Uncertainty
Kevin Warsh may replace Jerome Powell as Federal Reserve Governor, and the stock market is down in reaction to the news.
Quick overview
- Stock futures declined following President Trump's nomination of Kevin Warsh as the new chairman of the Federal Reserve.
- Warsh's hawkish stance may lead to more frequent rate cuts, potentially increasing inflation beyond the Fed's target.
- The Dow fell 0.3% while the S&P 500 and Nasdaq also experienced declines amid concerns over new tariffs and market volatility.
- Despite the recent dips, major tech stocks are performing well, with Meta Platforms reporting significant revenue increases.
Stock futures declined on Friday as the market opened to news that President Donald Trump had nominated Kevin Warsh as the chairman of the Federal Reserve.
It looks like Warsh will be replacing Jerome Powell as Federal Reserve governor if Trump has his way. The shakeup could cause volatility in the stock market, with investors worried about how much freedom the Fed will have with a Trump pick in place.
Warsh is known for a hawkish stance on Federal Reserve decisions, as he was formerly the Fed Governor. If he does get the position, he may recommend rate cuts more regularly than Powell did, and that could cause increased inflation. Inflation remains around 2.7%, higher than the Fed’s target of 2%, which is why the Fed did not issue a rate cut for January at this week’s monetary policy meeting.
Stock Market Reacts to Trump Pick
The Dow fell 0.3% on Friday but it is still close to a record high as it holds around 49,000 points. The S&P 500 likewise dipped and lost 0.4%, and the Nasdaq Composite dropped 0.5% for the day so far. At the same time, the dollar is climbing, gold and silver are dipping, and the cryptocurrency market is extremely bearish.
There could be more tariffs incoming, since Trump has threatened to issue tariffs against Canadian imports for the aircraft industry. His proposal is a 50% tariff as a means to counter Canada’s restrictive policy on Gulfstream jet sales. We may see the President walk back his tariff threat if Canada responds in a positive way to his demands. However, even talk of new tariffs causes the stock market to slow down and puts an end to rallies.
The stock market indices remain very close to their all-time highs, with tech and energy stocks performing the best. This is a big week for technology stocks in particular, and Meta Platforms, Tesla, Microsoft, and Amazon are all reporting quarterly earnings. Some of those have already released this week, and Meta has come out as the stock to beat with massive revenue increases and a strong outlook moving forward.
The stock indices are mostly higher this week than they were last week. Both the S&P 500 and Nasdaq indices are up, but the Dow Jones is down slightly. The market can handle a shift like Warsh’s nomination for now, but the long-term impact could be harmful to the stock market numbers.
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