Stocks, Bonds Drop as Trump Picks Warsh as Fed Chair Nominee | Bloomberg Brief 1/30/2026

Bloomberg Brief - February 2, 2024

Key Concepts:

• Kevin Warsh: Potential nominee for Federal Reserve Chair, known as a hawk and critic of quantitative easing (QE).
• Quantitative Easing (QE): A monetary policy where a central bank purchases government bonds or other assets to increase the money supply and lower interest rates.
• Hawkish Monetary Policy: A stance favoring higher interest rates to control inflation.
• SanDisk: Semiconductor company experiencing a significant stock surge due to strong earnings.
• DHS (Department of Homeland Security): US government agency facing scrutiny and potential policy changes related to immigration enforcement.
• ASP (Average Selling Price): A metric used to calculate the average revenue generated from each unit sold.
• Terminal Rate: The expected peak of interest rates in a monetary policy cycle.

Market Overview & Economic Data (5:00 AM - 5:30 AM EST)

The broadcast began with a snapshot of pre-market activity, indicating a generally negative trend. S&P futures were down approximately 0.9%, Nasdaq futures over 1%, and small-cap futures down 1.5%. Bond yields showed a slight steepening, with the 2-year yield at 3.55-3.56%, the 10-year yield at 4.26% (up 3 basis points), and the 30-year yield at 4.89% (up 4 basis points). The Bloomberg Dollar Index was up 0.5% to 1183, while gold experienced a 6% decline to around $5055 per troy ounce after a volatile session. Copper prices were at 13 to 34.

I. Federal Reserve Chair Nomination & Market Reaction

The primary focus was on President Trump’s impending announcement of his Federal Reserve Chair pick, widely expected to be Kevin Warsh. The market reacted negatively to this expectation, with stocks and bonds declining.

• Kevin Warsh’s Background: Warsh, 55, is a Stanford and Harvard Law graduate with experience at Morgan Stanley, the White House under George W. Bush, and the Federal Reserve (2006-2011). He resigned from the Fed due to objections to further QE.
• Market Concerns: Warsh is perceived as a “hawk” and a harsh critic of the Fed’s current policies. This has led to concerns about a potentially more aggressive monetary policy stance.
• Trump’s Perspective: President Trump appears drawn to Warsh’s experience, willingness to make significant changes to the Fed, and focus on inflation. He also noted Warsh’s connections to the financial world and his association with George Soros, a point seemingly valued by the President.
• Warsh’s Proposed Changes: Warsh advocates for a narrower Fed mandate focused solely on inflation, a smaller balance sheet, reduced “mission creep,” and less communication from Fed officials. He also suggested the Fed should relinquish its role in bank regulation.
• Quote: President Trump stated, “It’s going to be somebody that is very respected, somebody that’s known to everybody in the financial world. And I think it’s going to be a very good year.”
• Quote: Bloomberg’s Michael McKee noted, “Warsh has some strengths that the markets will like. One is that he has monetary policy experience and two, that he is very familiar with everybody on Wall Street.”

II. Government Shutdown & Immigration Debate

A tentative deal was reached between President Trump and Senate Democrats to avoid a full government shutdown, but a partial shutdown is still likely.

• Deal Details: Most agencies will be funded for a full year, but the Department of Homeland Security (DHS) will receive funding for only two weeks while negotiations continue regarding immigration policies.
• Immigration Concerns: Democrats are pushing for changes to DHS policies following recent shootings, including banning masks for agents and requiring more search warrants.
• IRS Lawsuit: President Trump is suing the IRS, a move linked to the need for timely tax refunds to support the economic impact of recent legislation.

III. Corporate Earnings & Stock Movements

Several companies reported earnings, leading to significant stock movements.

• SanDisk: Shares surged nearly 20% after a “blowout” earnings report, confirming momentum in the computer hardware and storage sector.
• KLA: Despite reporting earnings ahead of expectations, KLA shares fell 9% due to high investor expectations and supply constraints.
• Deckers Outdoor (UGG & HOKA): Shares rose over 13% after strong sales and raised guidance, driven by the success of its direct-to-consumer business and flagship brands.
• Apple: While reporting record quarterly revenue (up 38% in China), Apple shares pared back post-earnings gains due to concerns about rising input costs, particularly memory chip prices. CEO Tim Cook warned of a potential margin squeeze. The installed base of iPhones is now over 2.5 billion.
• Quote: Tom Mackenzie (Bloomberg Tech) noted, “The future for Apple is going to be how well they execute on the AI side.”

IV. Other Notable News

• India Boeing 787 Crash Investigation: The investigation is increasingly focusing on deliberate pilot action as the probable cause, ruling out mechanical failure and sabotage.
• Wrexham AFC & Gentex Collapse: Ryan Reynolds’ soccer club, Wrexham, lost $6.3 million due to the collapse of UK brokerage R Gentex.
• China Bond Sale: China is considering selling hundreds of billions of yuan in special government bonds to recapitalize its largest insurers.
• SpaceX/Tesla Merger: Elon Musk’s SpaceX is reportedly considering a merger with Tesla and/or X AI to boost Tesla’s market capitalization.
• New York City Mayor’s Fiscal Concerns: New York City Mayor Zoran Mamdani emphasized the need to change the city’s relationship with the state and wealthy corporations to address fiscal challenges.

Synthesis/Conclusion:

The broadcast highlighted a complex interplay of economic, political, and corporate factors. The anticipated appointment of Kevin Warsh as Fed Chair is injecting uncertainty into the market, while a potential government shutdown looms. Strong corporate earnings, particularly from Apple and SanDisk, were tempered by concerns about rising costs and supply chain constraints. The overall tone was cautious, with a focus on navigating potential risks and monitoring key developments in the coming days. The emphasis on potential changes to the Fed, the ongoing government funding debates, and the impact of rising costs on corporate profitability will likely dominate market sentiment in the near term.