Stocks Slip as Bond Yields Rise after Warsh Picked for Fed Chair

The S&P 500 Index ($SPX) (SPY) today is down -0.35%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -0.51%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -0.58%.  March E-mini S&P futures (ESH26) are down -0.36%, and March E-mini Nasdaq futures (NQH26) are down -0.60%.

Stock indexes are under pressure, and bond yields and the dollar are climbing today after President Trump said he is nominating Kevin Warsh to be the next Fed Chair.  The 10-year T-note yield rose to a 1-week high, gold prices fell to a 1-week low, and the dollar rose as Mr. Warsh, who often emphasized inflation risks as Fed Governor from 2006-2011, is seen as less supportive of deep interest rate cuts. Current Fed Chair Powell’s term ends in May. 

Stocks remained lower today after US producer prices rose more than expected last month, a hawkish factor for Fed policy.  US Dec PPI final demand rose +0.5% m/m and +3.0% y/y, stronger than expectations of +0.2% m/m and +2.8% y/y.  Dec PPI ex food and energy rose +0.7% m/m and +3.3% y/y, stronger than expectations of +0.2% m/m and +2.9% y/y.

Today’s news was better-than-expected after the US Jan MNI Chicago PMI rose +11.3 to 54.0, stronger than expectations of 43.7 and the strongest pace of expansion in more than two years.

Dovish comments today from Fed Governor Christopher Waller were supportive for stocks when he said, "Monetary policy is still restricting economic activity, and economic data make it clear to me further easing is needed."

On the positive side, President Trump said late Thursday that he reached a tentative deal with Senate Democrats to avert a US government shutdown. The deal would fund the Homeland Security Department for two weeks to allow more time for talks on immigration enforcement and contains full-year funding for several other government agencies. House Speaker Johnson said it would take 72 hours for the House to vote on the measure, meaning a partial government shutdown is likely, but the effect on federal operations would be minimal if it’s quickly resolved within a couple of days.

Q4 earnings season is in full swing, with 102 of the S&P 500 companies scheduled to report earnings this week.  Earnings have been a positive factor for stocks, with 77% of the 143 S&P 500 companies that have reported beating expectations.  According to Bloomberg Intelligence, S&P earnings growth is expected to climb by +8.4% in Q4.  Excluding the Magnificent Seven megacap technology stocks, Q4 earnings are expected to increase by +4.6%.

The markets are discounting a 16% chance for a -25 bp rate cut at the next policy meeting on March 17-18.

Overseas stock markets are mixed today.  The Euro Stoxx 50 is up by +1.21%.  China’s Shanghai Composite fell to a 3.5-week low and closed down -0.96%.  Japan’s Nikkei Stock 225 closed down -0.10%.

Interest Rates

March 10-year T-notes (ZNH6) today are down by -4 ticks.  The 10-year T-note yield is up +1.6 bp to 4.247%.  T-note prices are under pressure today, and the 10-year T-note yield rose to a 1-week high of 4.277% on the news that President Trump will nominate Keven Warsh as the next Fed Chair.  Mr. Warsh is seen as more hawkish than other Fed Chair candidates and often emphasized inflation risks during his tenure as a Fed Governor from 2006-2011.  T-notes remained lower after US Dec producer prices rose more than expected, a hawkish factor for Fed policy.

European government bond yields are mixed today.  The 10-year German bund yield is up +0.8 bp to 2.848%. The 10-year UK gilt yield is down by -0.1 bp at 4.510%.

The Eurozone Dec unemployment rate unexpectedly fell -0.1 and matched a record low of 6.2%, showing a stronger labor market than expectations of no change at 6.3%.

ECB Dec 1-year inflation expectations were unchanged from Nov at 2.8%, stronger than expectations of a decline to 2.7%.  The Dec 3-year inflation expectations unexpectedly rose +0.1 to a 2-year high of 2.6%, stronger than expectations of a decline to 2.4%. 

Eurozone Q4 GDP rose +0.3% q/q and+1.3% y/y, slightly stronger than expectations of +0.2% q/q and +1.3% y/y.

German Jan CPI (EU harmonized) fell -0.1% m/m and rose +2.1% y/y, stronger than expectations of -0.2% m/m and +2.0% y/y.

Swaps are discounting a 0% chance of a +25 bp rate hike by the ECB at its next policy meeting on February 5.

US Stock Movers

Chip makers and AI infrastructure stocks are falling today, weighing on the broader market.  KLA Corp (KLAC) is down more than -11% to lead losers in the S&P 500 and Nasdaq 100, and Western Digital (WDC) is down more than -5%.  Also, Advanced Micro Devices (AMD) and Seagate Technology Holdings Plc (STX) are down more than -3%.  In addition, Microchip Technology (MCHP) is down more than -2%, and Applied Materials (AMAT), NXP Semiconductors NV (NXPI), and Texas Instruments (TXN) are down more than -1%.

Mining stocks are selling off today, with gold prices sinking more than 4% and silver prices plunging more than 13%.  Coeur Mining (CDE) is down more than -8%, and Hecla Mining (HL) and Barrick Mining (B) are down more than -6%.  Also, Newmont (NEM) and Freeport McMoRan (FCX) are down by more than -5%.

PennyMac Financial Services (PFSI) is down more than -36% after reporting Q4 net revenue of $538.0 million, well below the consensus of $626.8 million. 

Appfolio Inc (APPF) is down more than -8% after forecasting full-year revenue of $1.10 billion to $1.12 billion, weaker than the consensus of$1.13 billion. 

Schneider National (SNDR) is down more than -6% after reporting Q4 operating revenue of $1.40 billion, weaker than the consensus of $1.45 billion.

Olin Corp (OLN) is down more than -6% after saying “it expects Q1 2026 adjusted EBITDA to be lower than Q4 2025 levels.” 

American Express (AXP) is down more than -2% to lead losers in the Dow Jones Industrials after reporting Q4 EPS of $3.53, below the consensus of $3.56.

Deckers Outdoor (DECK) is up more than +15% to lead gainers in the S&P 500 after reporting Q3 net sales of $1.96 billion, better than the consensus of $1.87 billion, and raising its full-year net sales forecast to $5.40 billion-$5.43 billion from a previous estimate of $5.35 billion, stronger than the consensus of $5.36 billion.

Sandisk (SNDK) is up more than +14% after reporting Q2 revenue of $3.03 billion, well above the consensus of $2.67 billion.   

Charter Communications (CHTR) is up more than +11% after reporting Q4 residential customers of 29.61 million, above the consensus of 28.70 million. 

Verizon Communications (VZ) is up more than +8% after it said it added 616,000 new subscribers in Q4 and authorized a share buyback program of up to $25 billion shares.   

Lumentum (LITE) is up more than +8% after Morgan Stanley raised its price target on the stock to $350 from $304. 

Air Products and Chemicals (APD) is up more than +4% after reporting Q1 sales of $3.10 billion, better than the consensus of $3.05 billion.

Colgate-Palmolive (CL) is up more than +3% after reporting Q4 net sales of $5.23 billion, above the consensus of $5.13 billion.

Earnings Reports(1/30/2026)

Air Products and Chemicals Inc (APD), American Express Co (AXP), Aon PLC (AON), Charter Communications Inc (CHTR), Chevron Corp (CVX), Church & Dwight Co Inc (CHD), Colgate-Palmolive Co (CL), Exxon Mobil Corp (XOM), Franklin Resources Inc (BEN), LyondellBasell Industries NV (LYB), Regeneron Pharmaceuticals Inc (REGN), Verizon Communications Inc (VZ).