Stocks, bonds trim losses as Trump taps Warsh

US stock futures and Treasuries pared losses after President Donald Trump nominated Kevin Warsh as the next Federal Reserve chair, with traders debating how far he would cut interest rates.

The dollar also trimmed its advance after Trump made his announcement on Truth Social. Moves earlier in the day suggested traders were dialing back expectations for policy easing under Warsh, who, as a policymaker from 2006 to 2011, often emphasized inflation risks even as others focused on supporting growth and jobs during the financial crisis.

READ MORE: What the Fed's first look in 2026 means for mortgages

The announcement ends months of speculation over who will lead the Fed, after Trump repeatedly criticized Chair Jerome Powell for not cutting interest rates. Powell's term ends in May.

"We advise against overdoing the Warsh hawkish trade across asset markets, and even see some risk of a whipsaw," wrote Evercore ISI economists led by Krishna Guha. "We see Warsh as a pragmatist, not an ideological hawk in the tradition of the independent conservative central banker."

Gold fell 5% as metals slumped. S&P 500 futures were down 0.4% after an earlier loss of 1.1%. The dollar pared gains of 0.6% to 0.3%. The yield on 10-year Treasuries rose one basis point to 4.25%. Money markets added to bets on a rate cut in June, with two reductions priced in for 2026.

Questions will now be raised around Warsh's policy direction after he recently aligned himself with Trump by arguing publicly for lower borrowing costs, going against his longstanding reputation as an inflation hawk.

READ MORE: Mortgage rates rise as FOMC inaction adds to uncertainty

"The market wants to be sure of the central bank's independence," said Guillermo Hernandez Sampere, head of trading at asset manager MPPM. "The start of his term will be closely watched. Whether interest-rate cuts are the right tool for rising inflation remains doubtful."

Traders also paid close attention to megacap tech earnings. Apple Inc. on Thursday delivered record quarterly sales and a better-than-anticipated forecast, but warned that rising component costs are threatening to squeeze margins. It followed a choppy session on Wall Street where dip buyers stepped in following a selloff driven by concerns over spending on artificial intelligence.

The iPhone maker's shares dropped 0.8% in premarket trading. Microsoft Corp. steadied after its 10% slump in the previous session. Meta Platforms Inc., which surged on Thursday after showing it can monetize heavy spending on AI-infrastructure, fell 1%.

"I see today's fall in Nasdaq futures as a short-term move and see this as a buying opportunity, should there be a bigger fall," said David Rainville, portfolio manager at Sycomore AM. "I don't think that having someone slightly more hawkish than expected at the Fed is a bad thing in itself for tech on the long run."

Elsewhere, Trump and Senate Democrats have reached a tentative deal to avert a disruptive US government shutdown as the White House continues to negotiate with Democrats on placing new limits on immigration raids that have provoked a national outcry.

Bitcoin fell as much as 4%, extending a rout that gathered pace on Thursday. The token is now down more than 30% from an all-time high reached in October. Over $1.5 billion in bullish positions across all tokens have been liquidated in the past 24 hours, according to CoinGlass data. 

Oil retreated as risk-off sentiment swept across broader markets, though Trump's escalating threats against Iran are keeping the market on edge. Brent traded around $70 a barrel on Friday after climbing above that level in the previous session for the first time since July.