Stocks stumble, dollar climbs after Trump taps Warsh for Fed, inflation data

By Chuck Mikolajczak

NEW YORK, Jan 30 (Reuters) - Global stocks slumped for a second straight session and the dollar strengthened sharply on Friday after U.S. President Donald Trump announced former Federal Reserve governor Kevin Warsh as his choice to become the next chair of the central bank, while a reading on inflation was stronger than expected.

Warsh, a frequent critic of the Fed, is 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. Warsh would take over when current Fed Chair Jerome Powell's term ends ?in May, if he wins confirmation in a closely divided Senate.

Trump said it would be inappropriate to ask Warsh whether he would cut interest rates, but added he was confident Warsh was inclined to lower borrowing costs.

Wall Street stocks were lower ?as economic data showed the Producer Price Index (PPI) for final demand surged 0.5% last month, above the 0.2% estimate of economists polled by Reuters, after an unrevised 0.2% ?gain in November. Businesses appeared to be passing on higher costs from import tariffs.

Investors also continued to assess a slew of corporate ?earnings, with Apple (AAPL) closing up 0.43% after ?the iPhone maker reported quarterly results while KLA Corp plummeted more than 15% as one of the biggest drags to the S&P 500 after the chipmaking equipment company posted its earnings.?

"Maybe some of the angst is just the fact ?that you've got uncertainty, you've got a new nominated chair, we'll have new priorities, perhaps new ?monetary direction, and that's an element of angst ... but nonetheless, on balance, his selection was pretty widely telegraphed among others on the short list," said Terry Sandven, chief equity strategist at U.S. Bank Asset Management in Minneapolis.?

"Today's (Friday's) volatility, I think it's more of a function of inflationary indicators that ?are showing some persistency and then secondly, you've got earnings that are being digested ?and the question on earnings ?is the profitability of the massive capex levels that are being spent," Sandven added.

The Dow Jones Industrial Average?fell?179.09 points, or 0.36%, to 48,892.47, the S&P 500 declined 29.98 points, or 0.43%, to 6,939.03 and the Nasdaq Composite stumbled 223.30 points, or 0.94%, to 23,461.82.?

For the week, the S&P 500 rose 0.3%, ?its first rise in three weeks, the Dow fell 0.4% and the Nasdaq slipped 0.2%. For the month, the S&P 500 rose 1.4%, the Dow climbed 1.7% and the Nasdaq advanced 0.9%.

MSCI's gauge of stocks across the globe lost 7.26 points, or 0.69%, to 1,042.93, but was on track for a weekly gain and the biggest monthly percentage gain since September.

The pan-European STOXX 600 index closed up 0.64%, holding gains after Trump's Fed announcement, as strong earnings have helped propel the index to its biggest monthly gain since May. The index registered 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% to 96.73, with the euro down 0.54% 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 edged higher, with the yield on the benchmark U.S. 10-year ?note up 2.4 basis points to 4.251%, on track for a second straight monthly advance. It would be the first consecutive monthly gains since early 2024.

Market expectations for the path of rate cuts were little changed after the Warsh announcement, not pricing in a greater than 50% chance for a cut until the central bank's June meeting, according to CME's FedWatch Tool.?

St. Louis Federal Reserve President Alberto Musalem said the U.S. central bank does not need to cut interest rates further unless the job market starts to deteriorate or inflation falls as the current policy rate of 3.50-3.75% is neutral.

The strength in the dollar helped cool the recent rally in metals. Gold tumbled below $5,000 per ounce after hitting a record of nearly $5,600 on Thursday. Spot gold was last down 10.14% to $4,847.87 an ounce, and poised to ?snap a three-week streak of gains. It has rallied more than 12% in January, its strongest monthly performance since November 2009.

Spot silver plummeted 27.66% to $84 an ounce, its biggest daily drop since at least 1982.

U.S. crude slipped 0.32% to settle at $65.21 a barrel and Brent eased slightly to $70.69 per barrel, down 0.03% on the day, consolidating recent gains and holding near six-month highs on Friday, supported by nagging tensions between the U.S. and Iran.

(Reporting by ?Chuck Mikolajczak in New York; Additional reporting by Sophie Kiderlin in London, Gregor Stuart Hunter in Singapore and Johann Cherian in Bengaluru; Editing by Kevin Liffey, Will Dunham and Matthew Lewis)