Fed holds rates as leadership shifts
Summary
Markets were choppy as the Fed held rates steady and signaled patience. President Trump nominated Kevin Warsh to succeed Chair Powell. Gold, silver, and oil climbed and then fell, equities edged higher, and investors now turn to jobs data for direction amid leadership uncertainty globally.
Last week in markets
Market volatility continued last week as investors weighed mixed technology earnings alongside a potential leadership transition at the Federal Reserve, with President Trump’s nomination of Kevin Warsh to succeed Chair Jerome Powell.
Heightened global instability drove renewed demand for hard assets. Gold surpassed $5,300 per ounce for the first time, while silver reached record highs near $117 per ounce. Prices then reversed last Friday, with gold and silver prices closing -9% & -26% respectively on Friday. Equities briefly pushed higher, with the S&P 500 crossing 7,000 on Wednesday before retreating later in the week. The index finished up 0.3%, bringing its year-to-date return to 1.5%. The 10-year U.S. Treasury yield ending the week up two bps to 4.24%.
The Fed stands firm
Last Wednesday, the Federal Reserve held its policy rate steady in a range of 3.5% to 3.75%, marking its first pause following three consecutive cuts late last year. Chair Powell pointed to continued economic momentum and inflation that remains somewhat elevated, currently running at 2.7%.
Powell’s messaging reflected a more balanced assessment of risks. He emphasized solid growth and early signs of labor market stabilization, stepping back from language that framed policy as clearly restrictive. While acknowledging that further progress on inflation could justify additional easing, he pushed back on expectations for near-term cuts, despite public pressure from the White House.
Two days later, President Trump announced Kevin Warsh as his nominee to succeed Powell. Markets are closely watching the development, given Warsh’s history of hawkish leanings and the implications for the Fed’s longer-term policy direction.
A split among the Magnificent Seven
Earnings results from four of the Magnificent Seven highlighted a bifurcated market reaction. Meta shares surged 10% after the company reinforced its commitment to artificial intelligence investment and delivered a constructive outlook. Microsoft shares fell roughly 10% to a nine-month low as concerns over slowing cloud growth overshadowed an earnings beat.
Apple reported record quarterly revenue driven by strength in iPhone sales and services, though shares moved modestly higher. Tesla experienced a volatile week, finishing slightly lower as investors balanced weaker than expected earnings against optimism around longer-term initiatives in robotics and autonomous vehicles.
Layoffs underscore a priority shift
Several large employers announced workforce reductions as companies continue to adjust to a more measured growth environment. UPS plans to eliminate 30,000 roles, while Amazon announced an additional 16,000 layoffs, bringing its total reductions since October to 30,000.
These moves reflect a broader shift away from the rapid expansion of 2021 toward tighter cost discipline and operational efficiency. Beyond near-term savings, many firms are reallocating resources toward automation and artificial intelligence, signaling longer-term changes in how they pursue growth.
The week ahead
The coming week brings a full slate of economic data, led by Friday’s U.S. Employment Situation report. The release will be an important gauge of labor market conditions ahead of the Fed’s next policy meeting in March. Earlier in the week, the JOLTS report on Tuesday and ADP private payrolls on Wednesday will offer additional insight into hiring momentum and labor demand.
Investors will also focus on the ISM Manufacturing survey on Monday and the ISM Services survey on Wednesday, with particular attention on the services sector, which continues to anchor U.S. economic growth. The Federal Reserve’s Senior Loan Officer Opinion Survey, released Monday, will provide further clarity on credit conditions and lending appetite.
Globally, central bank decisions will be in focus as the Bank of England, the European Central Bank, and the Reserve Bank of Australia meet this week. Expectations point to steady policy from the BoE and ECB, while the RBA faces greater pressure to tighten further amid persistent inflation.
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