Stocks fall, dollar rises after Trump taps Warsh for Fed, inflation data
An investor stands in front of an electronic board showing stock information at a brokerage house, in Hangzhou, Zhejiang province, February 25, 2016. REUTERS/China Daily
NEW YORK, Jan 30 : Global stocks declined for a second straight session on Friday, while the dollar rose, after U.S. President Donald Trump tapped former Federal Reserve governor Kevin Warsh as the next chair of the central bank, while a reading on inflation was stronger than expected.
Warsh is a frequent critic of the Fed and seen as an advocate of lower interest rates, but also as someone who would stop well short of the more aggressive easing associated with some other potential nominees. He will take over when Jerome Powell's term ends in May, if his nomination passes a closely divided Senate.
"Given his history, he’s a hawk in dove’s clothing. He’s abundantly qualified and will likely continue to be an independent thinker, not a puppet of the president," said Brian Jacobsen, chief economist at Annex Wealth Management in Menomonee Falls, Wisconsin.
"He may want lower rates for now, but not forever. A year from now, we may hear complaints from the White House about him."
Wall Street stocks were lower in early trading as economic data showed the Producer Price Index (PPI) for final demand surged 0.5 per cent last month, above the 0.2 per cent estimate of economists polled by Reuters, after an unrevised 0.2 per cent gain in November. Businesses appeared to be passing on higher costs from import tariffs.
Also weighing on equities was a decline of nearly 1 per cent in Apple after the iPhone maker reported quarterly results.
The Dow Jones Industrial Average fell 114.05 points, or 0.23 per cent, to 48,957.51, the S&P 500 fell 13.92 points, or 0.20 per cent, to 6,955.97 and the Nasdaq Composite fell 53.22 points, or 0.22 per cent, to 23,631.90.
MSCI's gauge of stocks across the globe fell 3.45 points, or 0.33 per cent, to 1,046.74, but was on track for a weekly gain and the biggest monthly percentage gain since September.
The pan-European STOXX 600 index rose 0.77 per cent, holding gains after Trump's Fed announcement, as strong earnings have helped propel the index to its biggest monthly gain since May. The index is also poised for its seventh straight monthly gain, its longest streak since 2021.
In currencies, the dollar was higher in the wake of the Warsh announcement and inflation data, continuing to show signs of stabilizing after recent weakness.
The dollar index, which measures the greenback against a basket of currencies, rose 0.57 per cent to 96.73, with the euro down 0.54 per cent at $1.1904. The dollar was still on track for a second straight weekly decline and third straight monthly drop.
Longer-dated U.S. Treasury yields also advanced, with the yield on the benchmark U.S. 10-year note up 2 basis points to 4.247 per cent, on track for a third straight weekly gain and second straight monthly advance. It would be the first consecutive monthly gains since early 2024.
The strength in the dollar helped cool the recent rally in gold. The metal briefly dropped back below $5,000 after hitting a record of nearly $5,600 on Thursday. Spot gold was last down 6.43 per cent to $5,046.49 an ounce, but set for a fourth straight weekly advance. It has rallied about 17 per cent in January, its strongest monthly performance since August 1982.
U.S. crude rose 0.17 per cent to $65.53 a barrel and Brent rose to $70.74 per barrel, up 0.04 per cent on the day, after Trump said on Thursday he was planning to speak with Iran's leaders, even as the Pentagon prepared for possible military strikes.
