Stocks Fall and Dollar Climbs as Trump Picks Warsh: Markets Wrap
(Bloomberg) — Wall Street traders drove stocks lower and the dollar higher while longer-term bonds underperformed as President Donald Trump announced his pick for the top job at the Federal Reserve: Kevin Warsh, who’s seen as less supportive of deep rate cuts and more worried about inflation. Gold plunged.
Equities trimmed their January advance, though the S&P 500 still headed toward its best month since October. Not even a blowout outlook from giant Apple Inc. was able to buoy risk appetite on Friday. And a faster-than-estimated rise in wholesale prices didn’t help sentiment either.
Warsh, who served on the US central bank’s Board of Governors from 2006 to 2011 and has previously advised Trump on economic policy, would succeed Jerome Powell when his term at the helm ends in May. It marks a comeback for Warsh, 55, whom the president passed over for the position in 2017 when he selected Powell.
If confirmed by the Senate, the former Fed governor will take charge of US monetary policy at a time when many economists and investors see its traditional insulation from elected officials as being under threat from the White House. Warsh aligned himself with the president in 2025 by arguing publicly for lower interest rates, going against his longstanding reputation as an inflation hawk.
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The Warsh pick should help stabilize the dollar some and reduce, though not eliminate, the asymmetric risk of deep extended dollar weakness by challenging “debasement” trades — which is also why gold and silver are sharply lower, according to Krishna Guha at Evercore.
“But, we advise against overdoing the Warsh hawkish trade across asset markets – and even see some risk of a whipsaw. We see Warsh as a pragmatist, not an ideological hawk in the tradition of the independent conservative central banker,” he said.
The S&P 500 fell 0.3%. The yield on two-year Treasuries fell two basis points to 3.54%. Those on 30-year bonds rose three basis points to 4.88%. The dollar climbed against all major currencies, while heading toward its worst month since August.
Bitcoin is poised for its worst streak of monthly losses in about seven years, as a deepening risk-off mood and fierce competition from traditional haven assets sap demand for the token.
With five years of history on the Board of Governors under the “Ben Bernanke Fed”, Warsh was known as the “bridge to Wall Street,” according to Jeffrey Roach at LPL Financial.
“Warsh is a safe pick. He’s forthright, willing to rethink convention, and not necessarily a ‘yes-man’,” Roach said. “Investors should be thankful.”
Trump’s nomination of Warsh to be the next Fed Chair is “a relatively safe choice for investors,” with his prior hawkish views counteracting concerns he might morph into a full-blown stooge, according to Stephen Brown at Capital Economics.
“Nonetheless, his desire for the Fed to operate with a smaller balance sheet still presents upside risks to long-term yields,” Brown said. “Moreover, his views downplaying the link between inflation and the pace of economic growth as well as his conviction that AI and the Trump administration’s deregulatory push will hold down inflation means there is a risk of the Fed falling behind the curve in the future.”
The selection of Warsh for the Fed should calm concern about the erosion of independence of the central bank, according to Eric Teal at Comerica Wealth Management.
“His candidacy included prior experience as a Fed Governor and as an investor,” Teal said. “He has been flexible on monetary policy in the past and will likely take the most strategic approach toward the role of the Federal Reserve mission going forward.”
Further deregulation, reducing the balance sheet, and additional rate cuts if inflation continues to moderate should be stimulative for the economy and markets including more value-oriented sectors of the market in the intermediate term, Teal concluded.
“Kevin Warsh as the nominee for Fed Chair means we could actually end up with a Fed that tilts hawkish at the margin,” said Sonu Varghese at Carson Group. “Warsh has historically been a hawk, even though he’s been talking rate cuts lately.
If he walks into the Fed with aggressive cuts as his baseline, he may not have a lot of credibility selling others on the need for further rate cuts, Varghese said. And we may even end up with a deeply divided committee that doesn’t cut at all, he concluded.
In a note titled “Warshing and Waiting,” TD Securities strategists say markets may struggle to pin down Warsh’s view given his notable shift in policy priorities after espousing a very hawkish stance over the last decade.
“Warsh will likely be a proponent of rate cuts in 2026, but the main question is whether his former hawkish persona makes a comeback down the road,” said the TD strategists.
Corporate Highlights:
Apple Inc. delivered record quarterly sales and a better-than-anticipated forecast for the current period, even as the company warned that rising component costs are threatening to squeeze margins. Amazon.com Inc. is in talks to invest as much as $50 billion in OpenAI and expand an agreement that involves selling computer power to the AI startup, according to a person with knowledge of the matter. Digital storage company Sandisk Corp.’s strong revenue and earnings outlook is extending a blistering rally in the top performing stock in the S&P 500 Index. Exxon Mobil Corp. and Chevron Corp. surpassed profit expectations as higher oil production helped offset the blow from lower crude prices. American Express Co. shares fell after the company’s Platinum card refresh boosted expenses more than expected and profit fell short of analysts’ estimates. Verizon Communications Inc. reported its biggest gain in mobile phone subscribers since 2019 and announced plans to buy back as much as $25 billion in shares, signaling turnaround efforts under new Chief Executive Officer Dan Schulman are starting to bear fruit. Charter Communications Inc. reported something the cable provider hasn’t seen in a while — a gain in pay-TV customers, its first increase in more than five years. Eli Lilly & Co. failed to win backing from the European Union’s medicines regulator for the use of its weight-loss drug Mounjaro to treat a certain kind of heart failure in adults with obesity. Costco Wholesale Corp. will use Instacart’s technology to power online grocery ordering in Spain and France, extending their partnership beyond North America for the first time as the delivery company looks overseas for growth. Deutsche Lufthansa AG will retrofit its largest aircraft with better business-class seats and put them into service starting in April — a quick turnaround that contrasts with the delays plaguing its new Boeing Co. 787 premium cabin. China Vanke Co. reported its losses widened by two-thirds to a record last year, citing a sharp decline in its property developments and additional provisions. Some of the main moves in markets:
Stocks
The S&P 500 fell 0.3% as of 10:36 a.m. New York time The Nasdaq 100 fell 0.5% The Dow Jones Industrial Average fell 0.4% The Stoxx Europe 600 rose 0.8% The MSCI World Index fell 0.2% Bloomberg Magnificent 7 Total Return Index rose 0.2% The Russell 2000 Index fell 1.3% Apple fell 1% Currencies
The Bloomberg Dollar Spot Index rose 0.6% The euro fell 0.7% to $1.1890 The British pound fell 0.6% to $1.3724 The Japanese yen fell 1% to 154.70 per dollar Cryptocurrencies
Bitcoin fell 1.6% to $83,064.2 Ether fell 2.9% to $2,733.04 Bonds
The yield on 10-year Treasuries advanced one basis point to 4.25% Germany’s 10-year yield was little changed at 2.85% Britain’s 10-year yield was little changed at 4.51% The yield on 2-year Treasuries declined two basis points to 3.54% The yield on 30-year Treasuries advanced two basis points to 4.88% Commodities
West Texas Intermediate crude rose 0.3% to $65.59 a barrel Spot gold fell 5.8% to $5,064.39 an ounce ©2026 Bloomberg L.P.
