Dow Falls Premarket as Markets Brace for Trump’s Fed Nominee
In the wake of President Trump’s anticipated announcement regarding the new chair of the Federal Reserve, stock futures are tumbling as markets react. The leading candidate for the position is Kevin Warsh, a former Fed governor. Betting markets increased his likelihood of succeeding Jerome Powell to approximately 85%, a significant rise from 30% the day before.
Investors harbor concerns that the new chair will adhere to Trump’s preference for lower interest rates. This follows a series of Trump’s critiques aimed at Powell, raising questions about the independence of the Federal Reserve. Johan Javeus, a senior economist at SEB, noted that while Warsh has recently called for lower rates, he previously gained a reputation as an inflation hawk.
Candidates for Fed Chair
Alongside Warsh, other candidates interviewed by Trump include:
- Kevin Hassett, top White House economist
- Rick Rieder, an executive at BlackRock
- Christopher Waller, current Fed governor
Market Reactions
In Friday’s premarket, the Dow Jones Industrial Average fell by 324 points, or 0.7%, reflecting worries over the Fed’s direction. The S&P 500 and the Nasdaq 100 also dropped, with losses reported at 0.7% and 0.8%, respectively. This decline follows a dismal performance for technology stocks. Despite Apple’s recent earnings report, the tech industry remains under pressure, notably as Microsoft shares dropped 10% following disappointing results.
The dollar showed signs of slight recovery, with some analysts suggesting Warsh’s potential nomination could bolster Fed independence and lead to greater market stability. Kathleen Brooks from XTB remarked that Warsh’s appointment could provide hope for the preservation of Fed autonomy.
Treasury Yields and Precious Metals
U.S. Treasury yields experienced increases as well. The two-year yield climbed to 3.564%, while the 10-year yield reached 4.266%. Additionally, the 30-year yield rose to 4.899%, indicating growing investor caution.
Precious metals faced a sharp selloff, with gold and silver prices plummeting by 3.5% and 7.9%, respectively. UBS Global Research’s Joni Teves noted that short-term price movements in these assets could signal an upcoming correction, though she retains a positive long-term outlook for gold.
