Wall Street Indices Fall Following Warsh’s Nomination and Unexpected Inflation Data
Wall Street’s major indices experienced a widespread drop on Friday, following Donald Trump’s nomination of Kevin Warsh as the new chairman of the US Federal Reserve and an unexpected rise in producer inflation that took the markets by surprise.
In this context, the S&P 500, the index that groups the most important companies on the New York Stock Exchange, fell by 0.61%. The Nasdaq Composite, which is dedicated to the technology sector, retreated by 0.76%. Meanwhile, the industrial index, Dow Jones, moved 0.84% lower.
The stocks with the highest increases were Deckers Outdoors (+15.75%), Charter Communications (+6.41%), and Verizon (+9.27%). On the other hand, the biggest drops were observed in KLA Corporation (-13%), Newmont Goldcorp (-10.69%), and Western Digital (-11.18%).
On a weekly level, Friday’s contraction reversed the increases recorded during the previous days: the Nasdaq fell by 0.17%, the Dow by 1.02%, and the S&P 500 by 0.06%.
Trump’s Candidate Likely to be Kevin Warsh
Markets perceive Warsh as a candidate who will support interest rate cuts, but who would stay far away from the more aggressive easing associated with other potential candidates, such as Kevin Hassett, Christopher Waller, and Rick Rieder.
“Trump finally opted for a traditional profile, with extensive experience within the Federal Reserve, and not for an outsider,” stated Portfolio Personal Inversores (PPI).
Meanwhile, the current chairman of the entity, Jerome Powell, has not yet provided details about what he will do after his term ends in May. He can still remain in the entity until 2028, but in the position of Director of Governors, a role that would counterbalance his successor.
Producer Inflation Surprised Everyone
As the market was digesting Warsh’s nomination, it was also revealed that the producer price index (PPI) for December rose by 0.5%, while core inflation, excluding food and energy, rose by 0.7%. In both cases, the forecast was only 0.2%.
“It is not clear if the discrepancy reflected any persistent problem caused by last fall’s shutdown, which disrupted data collection in October and November and made monthly comparisons difficult, but it is likely to reinforce the idea that the Fed did well to keep rates on hold this week instead of lowering them,” stated Schwab.
Stock Markets in Asia and Europe
In Europe, the Euro Stoxx closed 0.98% higher, while the German DAX increased by 0.85% and the French CAC followed with a rise of 0.68%. Outside the eurozone, the UK’s FTSE rose by 0.51%.
In contrast, the situation in Asia was the opposite. In China, the Hang Seng in Hong Kong plummeted by 2.08%, while the Shanghai stock exchange retreated by 0.96%. Meanwhile, the South Korean Kospi rose by just 0.06%, and Japan’s Nikkei 225 remained neutral.
