Stock futures were falling sharply to end another volatile week for markets after President Donald Trump said he would announce the new chair of the Federal Reserve today.
The hot favorite to lead the central bank is former Fed governor Kevin Warsh with betting markets quickly raising the likelihood that he will succeed Jerome Powell to around 85% from 30% late Thursday.
Investors widely expect whoever takes the role to quickly implement Trump’s demands for lower rates and fears remain about Fed independence after the president’s repeated attacks on Powell, who called subpoenas issued to the central bank a political pretext.
“More recently, [Warsh] has argued for the need for lower interest rates, but earlier in his career he has made a name for himself as an inflation hawk,” SEB senior economist Johan Javeus said in a note.
Trump has interviewed four candidates for the job. The others being: top White House economist Kevin Hassett, BlackRock executive Rick Rieder, and current Fed governor Christopher Waller.
Futures ties to the main three indexes were in the red with the Dow dropping 382 points, or 0.8%, in Friday’s premarket, having finished the previous session slightly higher. S&P 500 futures were down 0.9%, while futures on the tech-heavy Nasdaq 100 were dropping 1.1%, following a 0.7 fall on Thursday as software stocks got hammered. Apple’s better-than-expected earnings after the bell failed to lift the current gloom around Big Tech with Microsoft dropping 10% in regular trading as its disappointing numbers earlier in the week continued to weigh.
The dollar was edging up early Friday, with some seeing a Warsh nomination providing hope for Fed independence and adding some stability. “This is an interesting pick from the President and may give the market some hope that Fed independence will be preserved by elevating a former Fed insider,” XTB’s Kathleen Brooks says in a note.
U.S. Treasury yields were also up. The two-year Treasury yield rose 1.4 basis points to 3.564%, the 10-year yield was up 4 basis points at 4.266% and the 30-year yield was up 4.5 basis points at 4.899%, according to Tradeweb.
There was a sharp selloff in gold and silver as prices fell 3.5% and 7.9% respectively. The precious metals have rallied this year as investors sought havens amid geopolitical uncertainty. “Short-term price action is starting to get excessive, in our view, and the risk of an interim correction is rising,” said UBS Global Research’s Joni Teves in a note. She said the longer-term outlook for gold remains positive.