Major U.S. stock indices declined on Friday as traders bet that a potential nomination of Kevin Warsh for Federal Reserve Chair by the Trump administration would lead to a more hawkish central bank stance. Concurrently, U.S. Producer Price Index (PPI) for December rose 0.5% month-over-month, marking the largest increase in three months, while the core indicator's year-over-year growth rate also climbed to its highest level this year, both exceeding market expectations. The U.S. dollar recorded its largest single-day gain since last July, and silver suffered its most significant single-day decline on record.
The Dow Jones Industrial Average fell by 179.09 points, or 0.36%, to close at 48,892.47. The Nasdaq Composite dropped 223.31 points, or 0.94%, to 23,461.82. The S&P 500 index declined by 29.98 points, or 0.43%, finishing at 6,939.03. For the week, the Dow fell 0.42% cumulatively, while the S&P 500 gained 0.34%, and the Nasdaq slipped 0.17%. For the month of January, the Dow rose 1.73%, while the S&P and Nasdaq advanced 1.37% and 0.95%, respectively.
Intel (INTC.US) and Micron Technology (MU.US) fell over 4%, Taiwan Semiconductor Manufacturing Company (TSM.US) and Meta Platforms (META.US) dropped nearly 3%, and SanDisk (SNDK.US) briefly turned negative before ultimately closing up 6.85%. Apple (AAPL.US) bucked the trend, rising 0.46%.
Germany's DAX 30 index gained 268.78 points, or 1.11%, to close at 24,562.02. The UK's FTSE 100 index rose 57.14 points, or 0.56%, to 10,228.90. France's CAC 40 index increased by 55.17 points, or 0.68%, to 8,126.53. The Euro Stoxx 50 index climbed 58.71 points, or 1.00%, to 5,950.66. Spain's IBEX 35 index jumped 321.24 points, or 1.83%, to 17,898.54. Italy's FTSE MIB index advanced 476.90 points, or 1.06%, to 45,552.50.
Bitcoin reclaimed ground above $84,000. Ethereum fell over 4%, trading at $2,707.82.
The U.S. dollar surged significantly on Friday, posting its largest single-day gain since July, as a sharp decline in gold and silver prices weighed on currencies from the Australian dollar to the Swiss franc. The U.S. Dollar Index (DXY) ended a volatile month with a gain of approximately 0.9%. During this period, the index experienced substantial fluctuations influenced by Trump administration policies. Friday's dollar rebound was aided by falling precious metal prices and the impact of Trump's potential selection of Warsh for Fed Chair; however, the index still fell about 1.4% for January, its worst monthly performance since August.
The Australian dollar, Swiss franc, and Swedish krona—currencies sensitive to precious metal prices—led losses among the G10 currencies. Silver prices recorded their largest single-day drop on record, while gold saw its biggest decline since the early 1980s, halting their previous upward trends.
Spot gold plunged by nearly 13% intraday, its largest intraday drop in over forty years since the early 1980s, exceeding the decline seen during the 2008 financial crisis. Spot gold ultimately closed down 9.14% at $4,885.85 per ounce. Spot silver plummeted over 35% at one point, its largest recorded decline, and finished the session down 26.19% at $85.266 per ounce.
COMEX silver futures for February delivery rose by $8.1560 per ounce to $78.290 for the month, an increase of 11.63%, marking the ninth consecutive monthly gain and setting a record for the longest winning streak. Over the past nine months, COMEX silver futures have surged by $45.759, a gain of 140.66%, the largest nine-month cumulative increase since April 2011. However, silver futures prices fell $22.712 this week, a drop of 22.49%, the largest weekly decline since the week ending September 23, 2011, ending a three-week winning streak.
Analysts suggested the precious metals rally appears to be over, potentially for good. For gold, a drop below $4,000 seems unlikely, but if it occurs, it might attract strong investor interest. For current holders, the situation presents a difficult choice, as market conditions could reverse quickly or remain highly volatile, making panic decisions unwise.
NYMEX light crude oil futures for March delivery rose $2.21 to settle at $65.42 per barrel, a gain of 3.5%. March Brent crude futures increased by $2.31 to close at $70.71 per barrel, up 3.38%.
Former White House economic adviser Kevin Hassett endorsed Warsh's potential nomination while urging the Fed to shift towards easing. Hassett argued that market interest rates should fall given declining fiscal deficits, criticized the Fed's decision to hold rates this week as a mistake, and expressed confidence in achieving high growth with low inflation. He voiced strong respect for Warsh and expected a swift confirmation.
Federal Reserve official Mursalem indicated reluctance to support further rate cuts, citing inflation persistently above the 2% target. He agreed with holding rates steady, believing the current target range of 3.5%-3.75% is not significantly restrictive. Sustained price increases should deter the Fed from cutting rates to support the economy, and he cautioned that lowering short-term rates to ease labor market pressure could backfire by raising long-term rates.
Citigroup noted that gold investment is supported by intertwined geopolitical and economic risks, but about half of these risks might dissipate later this year. Core supportive factors, including U.S. debt concerns and AI uncertainty, could keep gold prices elevated. However, the bank estimates much of the risk priced into gold may not materialize by 2026. It suggested potential de-escalation in Ukraine and Iran, along with a confirmed Warsh nomination reinforcing Fed independence, could be medium-term negatives for gold.
Fed Governor Milan's attendance at the March meeting depends on the Senate's confirmation timeline for Warsh. He will serve until a successor is confirmed. Fed Governor Waller stated the neutral rate is around 3%, and current policy is somewhat restrictive. He expects weak 2024 job data to be revised down, anticipates near-zero job growth in 2025, and has heard of potential 2026 layoffs, warning of significant employment deterioration risk. On inflation, he noted core measures are near the 2% target and should reach it, arguing policy should look through temporary tariff effects. Waller dissented at this week's meeting, favoring a 25-basis-point cut.
GameStop (GME.US) CEO Ryan Cohen is considering a major acquisition, potentially targeting a public company in the consumer or retail sector, aiming to build GameStop into a company valued over $100 billion, up from its current $11 billion market cap.
Amazon (AMZN.US) requested the FCC extend the deadline for launching half of its low-earth-orbit satellite constellation, "Project Kuiper," by 24 months to July 2028, or waive the milestone, citing a shortage of available rockets needed to launch over 1,600 internet satellites by mid-2026.
Jefferies raised its price target on Apple (AAPL.US) from $276.47 to $286.54.
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