US stocks opened slightly lower Friday as Wall Street digested the announcement that former Fed Governor Kevin Warsh is President Donald Trump’s nominee to lead the Federal Reserve.
The Dow was down 147 points, or 0.3%. The broader S&P 500 fell 0.32%. The tech-heavy Nasdaq Composite slid 0.42%.
The 10-year Treasury yield ticked higher. The US dollar index rose 0.35%, recouping some losses after sliding earlier this week.
“The dollar has been waiting for a catalyst for a recovery, and the news that Kevin Warsh is … the new Federal Reserve Chair nominee today offers exactly that,” Francesco Pesole, FX strategist at ING, said in a note.
“Warsh has been amongst the most market-friendly candidates, as he is a former Fed governor with a history of hawkish views,” Pesole said.
“Hawkish” refers to someone who tends to prefer to keep rates higher to combat inflation. Higher rates can boost the dollar.
Gold futures sank 5.1% and silver futures plunged 14.5%, pulling back after sharp rallies in recent weeks.
Thierry Wizman, global FX and rates strategist at Macquarie, said in a note that he does not think Warsh is as hawkish as the market expects.
“Warsh is not a ‘hawk’ these days,” Wizman said. “Warsh has been Trump’s ‘monetary policy twin’ from day one.”
“Trump’s explicit criteria for the new chair was someone who ‘believes in lower interest rates, by a lot,’” Wizman said. “That last fact alone should make traders wary of the prospect that Warsh is a ‘hawk.’”