U.S. stocks finished lower on Friday as investors weighed President Donald Trump’s choice of former Federal Reserve governor Kevin Warsh to potentially replace Fed Chair Jerome Powell, while also sifting through a heavy mix of earnings, inflation data, and political uncertainty in Washington.
Market jitters were amplified by worries that Warsh, widely viewed as a policy hawk, could steer the central bank in a less accommodative direction, even as inflation pressures show signs of persistence. With Powell’s term set to expire in May, Warsh, if confirmed, would inherit a Fed he has previously argued should shrink its footprint in the economy and reassess its monetary toolkit.
Beyond monetary policy, investors were also digesting heightened geopolitical tensions, including with Iran, and renewed concerns about a possible U.S. government shutdown after fresh obstacles surfaced in the Senate over funding legislation.
“Markets are recalibrating to Trump’s pick of Kevin Warsh and what that means for the future path of monetary policy,” said Michael Hans, chief investment officer at Citizens Wealth, noting a rotation that saw the U.S. dollar strengthen while precious metals slid sharply.
Stocks broadly reflected that unease. The Dow Jones Industrial Average fell 179 points, or 0.36%, while the S&P 500lost 0.43%. The tech-heavy Nasdaq Composite led declines, sliding 0.94%.
Small-cap stocks also struggled. The rate-sensitive Russell 2000 dropped 1.6% on the day, underperforming larger peers, though it still finished the month with a gain of more than 5%—well ahead of the S&P 500 and Nasdaq. The Dow, meanwhile, posted its ninth straight monthly advance, its longest winning streak since 2018.
Inflation data added another layer of caution. Producer prices rose more than expected in December, reinforcing fears that price pressures could intensify in the months ahead.
“There’s a convergence of concerns, uncertainty around the Fed chair announcement, uneven tech earnings, lingering inflation, and even the risk of a brief government shutdown,” said Angelo Kourkafas, senior global strategist at Edward Jones.
Corporate earnings delivered a mixed picture. Apple shares recovered from early losses to close modestly higher after the iPhone maker reported results and projected revenue growth of up to 16% for the March quarter, while cautioning that rising memory-chip costs are beginning to weigh on margins.
By contrast, Microsoft slipped again after suffering its steepest one-day drop since 2020 earlier in the week, following a cloud-revenue miss. Meta Platforms also ended lower.
There were bright spots. Tesla jumped 3.3%, buoyed by reports that SpaceX is exploring potential deals with the automaker and other Elon Musk-led companies, giving the S&P 500 its biggest single-stock boost. Verizon Communications surged nearly 12% after forecasting stronger-than-expected profit and cash flow, citing robust subscriber growth fueled by aggressive holiday promotions.
In the materials sector, losses mounted as gold and silver prices slid. Shares of U.S.-listed miners followed suit, dragging the S&P 500’s materials group down nearly 2% for the session. On the flip side, consumer staples outperformed, led by a sharp rally in Colgate-Palmolive after the company projected sales above Wall Street expectations.
Elsewhere, SanDisk climbed nearly 7% on an upbeat forecast tied to surging AI-driven storage demand, while KLA Corporation plunged more than 15% despite beating quarterly profit and revenue estimates.
Market breadth skewed negative. Decliners outpaced advancers on both the New York Stock Exchange and Nasdaq, and trading volume swelled to nearly 24 billion shares, well above the recent average—underscoring the intensity of investor repositioning as January drew to a close.
By The Midtown Times Staff
