NEW YORK (AP) — Prices are swinging across financial markets on Friday as investors try to figure out what President Donald Trump’s new nominee to lead the Federal Reserve will mean for them.
The initial reactions have been uneasy and sometimes quick to change because of the uncertainty. U.S. stocks fell modestly, with the S&P 500 down 0.1% in early trading. The Dow Jones Industrial Average was down 118 points, or 0.2%, as of 9:40 a.m. Eastern time,
and the Nasdaq composite was 0.2% lower.
The value of the U.S. dollar, meanwhile, sank against other currencies following Trump’s announcement before climbing back. Prices for U.S. Treasury bonds initially rose, perhaps suggesting increased hopes in the Fed’s ability to keep inflation under control over the long term, before paring back. And some of the wildest action was again in the precious metals markets, where the price of gold went through a couple more cycles of tumbling sharply and retracing some of its losses.
The Fed’s chair has a big influence on the economy and markets worldwide by helping to dictate where the U.S. central bank moves interest rates. Such moves can lift or weigh on prices for all kinds of investments, as the Fed tries to keep the U.S. economy humming without letting inflation get out of control. Trump has been pushing for lower interest rates, which usually help goose the economy but can also lead to higher inflation.
A fear in financial markets, one that has helped push up gold’s price and weaken the U.S. dollar’s value recently, is that the Fed will lose some of its independence because of Trump. The longtime assumption has been that the Fed can operate separately from the rest of Washington so that it can make decisions that are painful in the short term, such as keeping interest rates high and grinding down on the economy, to fix a long-term problem, such as getting inflation back down to its goal of 2%.
Trump’s nominee, Kevin Warsh, used to be a governor on the Fed’s board, so investors are familiar with him. That could also mean Warsh is familiar with and hopes to continue the institution of the Fed as an independent operator. But Warsh has also been critical of the Fed’s current chair, Jerome Powell.
“Indeed, Warsh is not the Fed’s guy, he is Trump’s guy, and has shadowed Trump on monetary policy almost every step of the way since 2009,” according to Thierry Wizman, a strategist at Macquarie Group. “This doesn’t necessarily mean that Warsh will push the Fed into rate cuts soon,” but it could indicate he may be quicker to do so when the time comes.
On Wall Street, Apple was the heaviest weight on the S&P 500 and fell 1.5% even though it reported a stronger profit for the latest quarter than analysts expected.
In the metals markets, gold’s price tumbled 4.4% to $5,120.80. Its momentum has suddenly run out after its price had roughly doubled over 12 months. It topped $5,000 for the first time on Monday and got near $5,600 on Thursday.
Silver, which has been on a similar, jaw-dropping tear, fell even more. It dropped 12.3%
Prices for gold and other precious metals had been surging as investors look for safer investments while weighing a wide range of risks, including a U.S. stock market that critics say is expensive, political instability, threats of tariffs and heavy debt loads for governments worldwide.
In stock markets abroad, indexes rose in much of Europe following a more mixed performance in Asia.
Stocks rose in Jakarta after the CEO of Indonesia’s stock market, Imam Rachman, resigned Friday. It had stumbled in prior days after MSCI, an influential company that creates stock and other indexes, warned about market risks such as a lack of transparency.
___ AP Business Writers Matt Ott and Elaine Kurtenbach contributed.
