Market Snapshot
| Dow | 48891.26 | -179.09 | (-0.36%) | | Nasdaq | 23461.84 | -223.30 | (-0.94%) | | SP 500 | 6939.02 | -29.98 | (-0.43%) | | 10-yr Note |
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| | NYSE | Adv 1150 | Dec 1582 | Vol 1.83 bln | | Nasdaq | Adv 1515 | Dec 3001 | Vol 9.38 bln |
Industry Watch
| Strong: Consumer Staples, Energy, Real Estate, Health Care |
| | Weak: Materials, Information Technology, Financials, Industrials, Utilities, Communication Services, Consumer Discretionary |
Moving the Market
--Market facing broad pullback
--Former Fed Governor Kevin Warsh confirmed to be President Trump's pick for Fed Chair candidate
--Lingering mega-cap weakness, though Tesla (TSLA) is a lone standout
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Stocks retreat but pare losses in final January session
30-Jan-26 16:25 ET
Dow -179.09 at 48891.26, Nasdaq -223.30 at 23461.84, S&P -29.98 at 6939.02
[BRIEFING.COM] The S&P 500 (-0.4%), Nasdaq Composite (-0.9%), and DJIA (-0.4%) retreated amid relatively broad weakness in the stock market today, though they improved from session lows throughout the afternoon. The Russell 2000 (-1.6%) and S&P Mid Cap 400 (-1.0%) finished with wider losses both for the session and for the week.
It has been a busy day from a headlines perspective, with the buzz starting well before the opening bell.
Perhaps most notably, former Fed Governor Kevin Warsh was nominated by President Trump to be the next Fed Chair. The decision did little to the market's implied monetary policy path expectations, and equity futures and the U.S. Treasury market reacted calmly to the news, though several other headwinds were already pressuring stocks.
Gold and silver faced a massive retreat today after an extended run through record territory. Gold finished 11% lower today, while silver dropped 32%. Unsurprisingly, the materials sector (-1.8%) faced the widest loss, with Newmont Corporation (NEM 112.33, -14.60, -11.50%) and Freeport-McMoRan (FCX 60.22, -4.91, -7.54%) among some of the worst-performing S&P 500 names today.
The top-weighted information technology sector (-1.3%) was another notable laggard, as the reaction to this week's mega-cap earnings reports continues to be underwhelming. Despite a sizable earnings beat, Apple (AAPL 259.48, +1.20, +0.46%) traded lower for most of the day before squeaking out a modest gain. Microsoft (MSFT 430.29, -3.21, -0.74%) also failed to garner any buy-the-dip interest after a double-digit retreat yesterday. The Vanguard Mega Cap Growth ETF finished 0.8% lower, with two consecutive days of weakness moving it into negative territory for the week.
Chipmaker names also faced pressure, sending the PHLX Semiconductor Index 3.9% lower. KLA Corporation (KLAC 1427.94, -256.77, -15.24%) was a notable laggard despite topping earnings estimates. Sandisk (SNDK 576.25, +36.95, +6.85%) soared nearly 20% after a blowout earnings report of its own but saw gains steadily eroded amid increasing pressure across its peers.
While seven S&P 500 sectors closed with losses, the materials and technology sectors were the only sectors to finish more than 0.3% below their flatlines as the broader market generally improved throughout the session.
The defensive consumer staples (+1.4%) and health care (+0.6%) sectors both outperformed amid weakness in growth stocks. Colgate-Palmolive (CL 90.31, +5.07, +5.95%), Church & Dwight (CHD 96.27, +4.31, +4.69%), and Stryker (SYK 369.46, +15.16, +4.28%) all posted solid gains after earnings.
The energy sector (+1.0%) also finished higher, with Chevron (CVX 176.89, +5.70, +3.33%) leading the strength after its earnings release, while the real estate sector (+0.1%) eked out a slight gain.
The consumer discretionary sector (-0.1%) just missed out on a gain, though the fact that it was anywhere near its flatline given how few of its components traded higher is impressive.
Tesla (TSLA 430.41, +13.85, +3.32%) saw a solid rebound from yesterday's post-earnings weakness following a Bloomberg report that Elon Musk's SpaceX is considering a merger with the EV giant or xAI as an alternative to a traditional IPO.
Elsewhere, Deckers Outdoor (DECK 119.28, +19.38, +19.40%) was the top-performing S&P 500 name today after a blowout earnings report.
Other notable earnings moves include Verizon (VZ 44.52, +4.71, +11.83%), American Express (AXP 352.23, -6.27, -1.75%), and Visa (V 321.87, -9.93, -2.99%).
Looking ahead, the market remains firmly in earnings mode, with several high-profile mega-cap reports, including those of Amazon (AMZN 239.30, -2.43, -1.01%) and Alphabet (GOOG 338.53, -0.13, -0.04%), still on deck that are likely to dictate near-term direction and determine whether this week’s pullback proves to be a pause or the start of a deeper consolidation.
U.S. Treasuries finished January in mixed fashion, with 5s and shorter tenors recording gains while longer tenors lagged, ending with slim losses. The 2-year note yield settled down two basis points to 3.53% (-7 basis points this week; +5 basis points in January), and the 10-year note yield settled up one basis point to 4.24% (UNCH this week; +7 basis points in January).
- Russell 2000: +5.3% YTD
- S&P Mid Cap 400: +4.0% YTD
- DJIA: +1.7% YTD
- S&P 500: +1.4% YTD
- Nasdaq Composite: +1.0% YTD
Reviewing today's data:
- December PPI 0.5% (Briefing.com consensus 0.2%); Prior 0.2%, December Core PPI 0.6% (Briefing.com consensus 0.3%); Prior 0.0%
- The key takeaway from the report is the lingering 3-handle on the year-over-year changes, which will keep alive concerns about pass-through (to the consumer) and possible margin compression (for wholesalers and retailers) if they don't pass through their higher costs.
- January Chicago PMI 54.0 (Briefing.com consensus 43.0); Prior was revised to 42.7 from 43.5
More mega-cap earnings ahead
30-Jan-26 15:30 ET
Dow -245.92 at 48824.43, Nasdaq -297.25 at 23387.89, S&P -48.43 at 6920.57
[BRIEFING.COM] The major averages remain firmly lower with just half an hour remaining in today's session.
The market has another busy week of earnings ahead of it, which will include reports from Alphabet (GOOG 338.24, -0.42, -0.12%) and Amazon (AMZN 239.97, -1.76, -0.73%). The mega-cap complex has struggled so far this year, with this week's slate of earnings not doing it any favors. The Vanguard Mega Cap Growth ETF (-1.0%) is currently down 2.0% for the year.
Market modestly improved in late afternoon
30-Jan-26 15:05 ET
Dow -232.19 at 48838.16, Nasdaq -213.92 at 23471.22, S&P -28.27 at 6940.73
[BRIEFING.COM] The S&P 500 (-0.4%), Nasdaq Composite (-0.8%), and DJIA (-0.4%) are off of their session lows as the broader market sees some improvements this afternoon.
Four S&P 500 sectors now hold gains, with the defensive consumer staples (+1.0%) and health care (+0.6%) sectors leading the way. Colgate-Palmolive (CL 89.47, +4.23, +4.96%) and Church & Dwight (CHD 95.63, +3.67, +3.99%) are both standouts after topping earnings expectations.
The energy sector (+0.6%) also holds a solid gain despite crude oil futures settling today's session $0.19 lower (-0.3%) at $65.19 per barrel. Chevron (CVX 175.64, +4.45, +2.60%) is gaining ground after beating its own earnings estimates, while Exxon Mobil (XOM 140.35, -0.16, -0.11%) is flattish.
S&P 500 Falls 0.4%; Charter, Air Products Up, AppLovin Drops
30-Jan-26 14:30 ET
Dow -196.89 at 48873.46, Nasdaq -173.19 at 23511.95, S&P -25.46 at 6943.54
[BRIEFING.COM] The S&P 500 (-0.37%) is narrowly in "first" place, down just 25 points and firmly off afternoon lows.
Briefly, S&P 500 constituents Charter Comm (CHTR 205.95, +14.43, +7.53%), Air Products (APD 271.76, +15.74, +6.15%), and Colgate-Palmolive (CL 89.28, +4.04, +4.74%) pepper the top of the average all following earnings.
Meanwhile, AppLovin (APP 492.17, -77.07, -13.54%) is second-worst performer in the standings as Google's (GOOG/L 338.52, -0.14, -0.04%) Project Genie fuels fears AI will accelerate game creation, intensifying competition and pressuring mobile ad monetization.
Gold Tumbles 11% as Warsh Fed Nomination Lifts Dollar, Triggers Crowded Long Unwind
30-Jan-26 14:00 ET
Dow -220.41 at 48849.94, Nasdaq -171.32 at 23513.82, S&P -27.22 at 6941.78
[BRIEFING.COM] The tech-heavy Nasdaq Composite (-0.72%) is in last place on Friday afternoon, albeit decently off lows from the past half hour.
Gold futures settled $609.70 lower (-11.3%) at $4,745.10/oz, down then about -4.7% on the week, as markets reassessed U.S. monetary policy expectations following President Trump's nomination of Kevin Warsh as Fed chair, which boosted the dollar and pressured real rates higher. The sharp move was amplified by profit-taking and technical selling after gold's record run, triggering a rapid unwind of crowded long positions.
Meanwhile, the U.S. Dollar Index is up about +0.8% to $96.89.
Western Digital Beats Big, but the Stock Hits a Sell-the-News Drive (WDC)
Western Digital (WDC -12%) is trading sharply lower despite reporting an impressive fiscal Q2 (Dec) beat-and-raise last night. Results were driven by accelerating cloud demand tied to higher-capacity storage and expanding AI workloads.
- Cloud revenue represented 89% of total sales, totaling $2.7 bln, up 28% yr/yr, driven by strong demand for higher-capacity nearline products. Client revenue accounted for 6% of total revenue, up 26% yr/yr. Consumer revenue represented 5% of total revenue, down 3% yr/yr.
- As AI capabilities expand, data generation and data value continue to rise, driving rapidly increasing demand for storage across training and inference workloads. • The combination of AI growth and cloud expansion is fueling a surge in demand for higher-density storage solutions.
- During the quarter, WDC shipped over 3.5 mln units of its latest-generation ePMR products, offering up to 26 TB CMR and 32 TB UltraSMR capacities. The company has also begun qualification of its HAMR and next-generation ePMR platforms with separate hyperscale customers. These platforms deliver significantly higher storage density versus conventional drives, enabling mass-scale data analysis.
Why the stock is lower: The primary driver appears to be a sell-the-news reaction. WDC shares have surged from roughly $50 in early June to $278 heading into yesterday's close, leaving the stock looking overbought. In addition, peer Seagate (STX) reported strong earnings earlier this week, suggesting that a beat-and-raise was largely priced in.
Another overhang emerged during the Q&A, when WDC stated that it intends to monetize its equity stake in SanDisk (SNDK) before the one-year anniversary of the separation on February 25, which is right around the corner. WDC currently owns 7.5 mln shares of SanDisk. Based on recent pricing, that stake is worth approximately $4.6 bln. Management indicated it is considering a debt-for-equity swap. Given SanDisk's outsized recent performance, WDC's stake has likely contributed meaningfully to the stock's sharp rally. An exit from the SanDisk position could therefore weigh on sentiment and remove a key supporting factor for WDC shares going forward.
Briefing.com Analyst Insight:
Western Digital delivered a strong operational quarter, underscored by accelerating cloud demand and growing confidence in its next-generation storage platforms tied to AI-driven workloads. However, with the stock already pricing in a near-flawless outcome, the results were not enough to sustain momentum. The planned monetization of WDC's SanDisk stake introduces an additional sentiment risk, particularly given how much value that stake currently represents. While long-term fundamentals tied to AI and hyperscale storage remain compelling, near-term upside may be capped as investors digest valuation, positioning, and capital structure uncertainty.
Deckers Outdoor running sharply higher as HOKA and UGG power Q3 beat-and-raise (DECK)
Deckers Outdoor (DECK) delivered a standout 3Q26 beat-and-raise, igniting a huge rally in the stock. The company crushed EPS and revenue expectations and raised its FY26 outlook comfortably above analyst forecasts. This performance is underpinned by the relentless growth of HOKA and the record-breaking resilience of UGG, both of which continue to benefit from disciplined marketplace management and a profitable shift toward direct-to-consumer (DTC) sales.
- Q3 revenue reached $1.96 bln (up 7.1% yr/yr), surpassing the FactSet consensus estimate of $1.88 bln.
- EPS hit $3.33, a record for the third quarter and a substantial beat against the $2.77 analyst forecast.
- HOKA revenue surged 18.5% to $628.9 mln, driven by strong full-price selling and the brand's return to the top position in performance run specialty.
- UGG revenue reached a record $1.31 bln (up 4.9%), supported by healthy demand across key seasonal franchises and resilient price elasticity.
- DTC net sales increased 8.1% to $1.09 bln, reflecting the ongoing strategic priority of owning the consumer relationship.
- International net sales jumped 15.0% to $756.7 mln, significantly outpacing domestic growth and highlighting a massive global white-space opportunity.
- Gross margin remained robust at 59.8%, supported by high levels of full-price selling and favorable brand mix.
- FY26 guidance was raised across the board, with revenue now projected between $5.40–$5.425 bln and EPS of $6.80–$6.85, both well ahead of consensus.
Briefing.com Analyst Insight
DECK’ Q3 results confirm that HOKA and UGG have transitioned into year-round growth engines that are successfully siphoning market share from legacy competitors like NIKE (NKE) and Adidas (ADDYY). HOKA's return to the top spot in run specialty, combined with UGG’s record $1.3 bln quarter, proves the portfolio's "must-have" status even in a promotional retail environment. While management flagged potential tariff headwinds for FY26, the raised guidance suggests they have ample levers, specifically pricing power and supply chain agility, to protect their industry-leading margins. Ultimately, DECK' ability to scale HOKA internationally while maintaining a clean wholesale marketplace provides a clear runway for continued valuation expansion.
KLA Corporation Pulls Back as In-Line Q3 Guide and 2026 Cadence Temper a Solid Quarter (KLAC)
KLA Corporation (KLAC) is sharply lower after reporting its Q2 (Dec) results last night. The company beat EPS expectations, though the upside was more modest than in recent quarters, while revenue increased 7.1% yr/yr to $3.3 bln, also better than expected. Q3 guidance essentially in line, with EPS of $8.30-$9.86 and revenue of $3.20-$3.50 bln.
- Growth continues to be fueled by AI-driven investment in leading-edge foundry/logic, HBM-led DRAM, and advanced packaging, with rising complexity keeping process-control demand elevated.
- Semiconductor Process Control revenue rose 9% yr/yr to $3.0 bln, split 60% foundry/logic and 40% memory, supported by scaling and a richer design activity and HPC/HBM-driven DRAM strength.
- Advanced packaging continued to grow as SoCs increase the value of process control in the package. CY25 Revenue was about $950 mln, up over 70% yr/yr, and expects mid-teens growth in CY26.
- Gross margin was 60 bps above guidance at 62.6%, but KLAC guided for a sequential step-down to 61.75% at the midpoint on weaker mix and higher DRAM chip costs, which it views as transitory.
- KLAC said its 2026 industry outlook has improved, expecting core WFE to grow in the high-single to low-double digits to the low-$120 bln range ($110 bln in 2025), with advanced packaging growing at a similar pace. That view is constructive but not as bullish as peer LRCX, which pegged 2026 WFE around $135 bln and sees advanced packaging up more than 40% yr/yr, outpacing overall WFE growth.
- Consistent with LRCX, KLAC expects CY26 to be back-half weighted, with mid-single-digit growth in 1H and acceleration in 2H, due to longer customer lead times from supply constraints.
Briefing.com Analyst Insight
KLAC continues to benefit from AI-led investment that is driving stronger demand for process control across its core markets. Foundry/logic and memory trends remain supportive, with leading-edge activity and HBM-led DRAM spending underpinning results, while advanced packaging continues to grow nicely as packaging complexity increases. That said, near-term factors are weighing on sentiment, including longer customer lead times and supply constraints that keep 2026 back-half weighted, along with a transitory margin headwind tied to higher DRAM chip costs and mix. With in-line guidance and KLAC's 2026 WFE view constructive but less bullish than LRCX's, the report likely didn't clear the high bar that growth investors were looking for after the stock's strong run. Even so, the longer-term AI and advanced packaging backdrop continues to support the broader growth story.
Apple’s "Quarter for the Record Books" Hits a Supply Snag (AAPL)
Apple (AAPL) is trading modestly lower despite delivering impressive fiscal Q1 (Dec) results, including its largest EPS upside in four years. While Apple is known for upside quarters, this one stood out as particularly strong. Revenue surged 15.7% yr/yr to a record $143.76 bln, well ahead of expectations. CEO Tim Cook described Q1 a "quarter for the record books," noting that iPhone demand was "simply staggering."
- Apple posted all-time revenue records in the Americas, Europe, Japan, and Rest of Asia Pacific, with growth across the vast majority of markets it tracks. Greater China revenue surged 38% yr/yr, driven by iPhone, which saw record upgraders and double-digit growth among switchers.
- iPhone revenue jumped 23.3% yr/yr to an all-time record $85.27 bln, well above the $78.65 bln Street estimate, driven by the iPhone 17 family.
- Mac revenue declined 6.7% yr/yr to $8.39 bln, reflecting a difficult comparison against the M4 MacBook Pro, Mac mini, and iMac launches in the year-ago quarter.
- iPad revenue increased 6.3% yr/yr to $8.6 bln, supported by an all-time record for upgraders.
- Wearables, Home, and Accessories revenue declined 2% yr/yr to $11.5 bln, impacted by supply constraints for AirPods Pro 3. Without those constraints, Apple believes the category would have grown.
- Services revenue rose 13.9% yr/yr to an all-time record $30 bln, roughly in-line with expectations. Records were set across advertising, music, payment services, and cloud services.
Why the stock is not reacting more positively: Apple cautioned that it expects constrained iPhone supply in Q2 (Mar), describing the situation as operating in "supply chase mode" amid exceptionally strong demand. Management acknowledged uncertainty around when supply and demand will rebalance. Constraints are being driven by limited availability of advanced semiconductor nodes used in Apple's SoCs. Additionally, Apple sees memory pricing increasing significantly, which may pressure gross margins in Q2 compared to the minimal impact seen in Q1.
Briefing.com Analyst Insight:
Apple delivered a standout fiscal Q1, highlighted by record revenue, massive iPhone upside, and continued strength in Services and emerging markets. However, the market's muted reaction reflects growing concern around near-term execution risks rather than demand. Supply constraints, rising memory costs, and uncertainty around gross margin pressure in Q2 are tempering enthusiasm following an otherwise exceptional quarter. While Apple's ecosystem strength and installed base expansion remain undeniable, the stock appears to be consolidating as investors wait for clearer visibility on supply normalization and margin durability.
Sandisk outpaces even the most bullish expectations with historic Q2 results and guidance (SNDK)
SanDisk (SNDK) delivered a monumental 2Q26 earnings report, solidifying its position not just as a storage provider, but as a critical linchpin in the global AI infrastructure build-out. Despite facing a high bar with shares already up 160% since December, SNDK easily cleared the hurdle, sending the stock soaring to new all-time highs. The company crushed expectations across the board and issued Q3 guidance that wasn't just a beat -- it was in a completely different ballpark than analyst estimates. This step-change in performance is driven by a structural shift in the NAND market, where SNDK is successfully transitioning from a commodity-cycle player to a high-margin AI powerhouse.
- Q2 revenue reached $3.03 bln (up 31% sequentially and 61% yr/yr), significantly exceeding the guidance range of $2.55-$2.65 bln.
- Non-GAAP EPS hit $6.20, a massive beat against the FactSet consensus estimate of $3.62.
- Non-GAAP Gross Margin expanded to 51.1%, a staggering 21.2 ppt jump from the prior quarter, driven by higher ASPs, favorable product mix, and unit-cost improvements.
- Data Center revenue jumped 64% sequentially, fueled by the rapid adoption of enterprise SSDs by AI infrastructure builders and hyperscalers.
- Edge Computing revenue reached $1.68 bln, benefiting from the AI PC and high-end smartphone refresh cycle requiring larger, faster NAND capacities.
- Consumer revenue stood at $907 mln, maintaining stability as the company prioritizes higher-margin strategic channels during a period of limited supply.
- Q3 Guidance is historic, with revenue projected between $4.40–$4.80 bln (vs. $2.93 bln FactSet consensus) and EPS of $12.00–$14.00 (vs. $5.11 FactSet consensus).
- The company is currently on "allocation" across all end markets, with demand expected to exceed supply through at least the end of calendar 2026.
- Western Digital (WDC) confirmed during their call that they intend to monetize their remaining 7.5 mln shares of SNDK before the one-year anniversary of the separation. While a large secondary sale can sometimes create overhang, WDC’s preference for a debt-for-equity swap or a structured secondary suggests a controlled exit.
Briefing.com Analyst Insight
SNDK's Q2 results confirm that the memory industry is experiencing its strongest upcycle in 30 years. The expansion of gross margins to 51.1%, and the projection of 65-67% for Q3, signals a structural reset in profitability. By moving to multi-year agreements, SNDK is effectively dampening the historical volatility of the NAND market. This transition is underpinned by the ramp-up of BiCS8 technology, which significantly lowers the cost-per-bit while meeting the extreme endurance requirements of AI training clusters. Crucially, management noted that AI data center demand is no longer a commodity play but a strategic architectural necessity, as high-performance NAND is increasingly required to eliminate the storage bottlenecks that hinder GPU efficiency. SNDK's decision to maintain disciplined CapEx while on allocation suggests they are prioritizing bottom-line expansion over market share grabs, a strategy that is clearly resonating with investors. The sheer magnitude of the Q3 EPS guide indicates that the AI appetite for memory is much larger and more immediate than even the most bullish models predicted.
The Big Picture
Last Updated: 30-Jan-26 15:16 ET | Archive
Kevin Warsh is the number one pick
Briefing.com Summary:
*Kevin Warsh’s nomination limited market fears about political influence or loss of central bank independence.
*Markets reacted calmly, suggesting confidence policy decisions remain committee-driven, with no immediate shift in rate-cut expectations.
*Kevin Warsh will be viewed as dovish but skeptical of aggressive QE, implying a softer “Fed put” and perhaps more measured policy responses.
With the number one pick in the 2026 Fed Chair draft, the President of the United States of America selects... Kevin Warsh! And that concludes (we think) this year's Fed Chair draft.
The pre-draft combine was a buzz of activity, with close to a dozen candidates in the running to be the number one selection. Early cuts whittled that list down to five: Kevin Hassett, Christopher Waller, Michelle Bowman, Rick Rieder, and Kevin Warsh.
Then, it was four, with a fair amount of jockeying in the prediction markets as to who would get the nod. Kevin Hassett was the frontrunner for a good bit, then Kevin Warsh, then Rick Rieder up until recently, but in the end it was the candidate from "central casting" that got the nod.
Kevin Warsh, who has been a Fed Governor in the past (2006-2011), will be returning to K Street as the Chair of the Board of Governors once he is confirmed by the Senate. The markets seem to like this pick, but it is also fair to say that it hasn't been celebrated like a number one draft pick typically is.
Decision by Committee
The good news is that Kevin Warsh will be a starter from day one. He knows the offense and the defense and has been battle-tested given his tenure at the Fed during the Great Financial Crisis and the concomitant Great Recession. There won't be much of a learning curve, other than the brief time it takes to helm the FOMC meetings and conduct his press conference.
Reports suggest he is interested in being a change agent for the Fed. What that ultimately means remains to be seen, yet past comments suggest he is not a proponent of excessive quantitative easing and rock-bottom interest rates.
The latter would seemingly put him at odds with President Trump, but the market knows full well the president wouldn't have made this selection if he wasn't assured that Mr. Warsh would advocate for a lower policy rate. That said, President Trump said in a press conference that he did not ask Kevin Warsh to commit to lower rates, because that would be "inappropriate," but that he thinks Kevin Warsh will lower rates anyway.
That begs the reminder that the Fed Chair himself doesn't lower rates. It is a decision by committee, with the majority dictating the path of the policy rate. So, if Mr. Warsh is going to lower rates, he will need to be persuasive with his argument as to why the Fed should lower rates.
If things go smoothly during the confirmation process, Mr. Warsh would be Fed Chair for the June 16-17 FOMC meeting. Jerome Powell's term as Fed Chair ends in May, but he retains the right to finish his term as a Fed Governor, which ends January 31, 2028. He has not made it known yet if he will continue as a Fed Governor after his term as Fed Chair ends.
That's an interesting subplot. Another interesting subplot is that Senator Thom Tillis (R-NC), who sits on the Senate Banking Committee, has declared that he will oppose any nominee until the DOJ investigation into the Fed is concluded.
Briefing.com Analyst Insight
The market, though, seems to have concluded that the selection of Mr. Warsh is arguably the least threat to the Fed losing its independence. We say as much, knowing that, following his selection, a red-hot metals trade imploded (silver futures dropped more than 30%), that longer-dated Treasuries were little changed, that the dollar strengthened, and that stocks languished more in response to earnings news and valuation concerns than anything else.
If it was thought that Mr. Warsh would be at the Fed only to do the president's bidding, as was thought to be the case with Kevin Hassett, long-term rates likely would have risen appreciably and the dollar would have weakened.
In a certain respect, we see it as a healthy development that the stock and bond markets in particular didn't overreact to the news of Mr. Warsh's nomination. The same can be said for the fed funds futures market, which had been pricing in the likelihood of two more rate cuts before the end of the year and continues to after this news, without any big swings in the probabilities underlying those expectations.
In one sense, these markets recognize that Mr. Warsh isn't necessarily going to be doing their bidding either and that the notion of a Fed put has softened a bit given his seeming aversion to falling back on QE so readily during times of distress.
Nevertheless, if/when Kevin Warsh steps into his role as Fed Chair, he will do so carrying the label of being a "dove." That is inevitable given the president's current stance on interest rates and his desire to name a Fed Chair who favors lower interest rates.
That should placate the market for the time being, but a stronger judgment will be reserved for when Kevin Warsh takes over the starting job as the number one draft pick, who always faces exceedingly high expectations. The combine is over, training camp starts now, and the season begins in June.
-- Patrick J. O'Hare, Briefing.com
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