PrintUS Equity Indexes Drop Following Warsh Nomination as Fed Chair, Hot Producer Price Inflation
BY MT Newswires | ECONOMIC | 01/30/26 04:31 PM EST04:31 PM EST, 01/30/2026 (MT Newswires) -- US equity indexes declined on Friday as Kevin Warsh's nomination to be the Federal Reserve chair lifted the dollar and slammed precious metals amid hot producer price inflation data.
The Nasdaq Composite dropped 1.1% to 23,421.1, with the S&P 500 down 0.6% to 6,927.5, and the Dow Jones Industrial Average down 0.4% to 48,861.2. Materials and technology led the decliners, while health care, consumer staples, and energy were the only gainers.
On Friday, President Donald Trump nominated Warsh, a former Fed governor, to succeed Jerome Powell. Warsh is said to be a proponent of a smaller Fed balance sheet, an inflation hawk, and a critic of quantitative easing, according to media reports. Trump has criticized Chair Jerome Powell on multiple occasions for being "too late" in cutting interest rates, which means investors will watch Warsh's policy moves closely after he takes over the reins.
"While arguing for higher rates when on the board, he [Warsh] has since called for a new regime at the Fed and lower interest rate policy," Stifel Chief Economist Lindsey Piegza said in a note. "Thus, seemingly checking all the boxes for the White House."
If Warsh is confirmed, he will advocate to push the federal funds rate to a "neutral" level, which most Fed members project is near 3.00%, according to a note from the Wells Fargo Investment Institute. "This expectation is consistent with our outlook for two quarter-point rate cuts in the second half of 2026."
The ICE US Dollar Index, which tracks the greenback's performance against a basket of major currencies, rose 0.8% to 97.08. Gold futures sank 8.1% to $4,890.1 per troy ounce, and silver futures plunged 27% to $82.51 per troy ounce following the announcement.
In economic news, the US Bureau of Labor Statistics reported Friday that the Producer Price Index rose by 0.5% in December following a 0.2% increase in November, above the 0.2% gain expected in a Bloomberg-compiled survey.
After excluding food and energy prices, core PPI jumped by 0.7%, above the 0.2% gain expected and following a flat reading in the previous month.
The fastest pace of core producer prices since July, coupled with expectations for Q4 GDP of 4.2% and a potential pickup in payrolls in the January report, "at least some on the Committee - and the market - have to be questioning the Fed's decision to lower policy as much as they have in recent months," Piegza added.
US Treasury yields were mixed, with the 10-year Treasury yield up two basis points to 4.25%. The two-year yield fell 2.2 basis points to 3.53%.
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