US stock indexes have closed lower as investors viewed President Donald Trump's nomination of former Federal Reserve Governor Kevin Warsh as a hawkish choice to succeed Federal Reserve Chair Jerome Powell, while also digesting earnings reports and a high inflation reading.
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On top of assessing the risks from US tensions with countries including Iran, investors on Friday were also worried about the prospect of another US government shutdown after new barriers emerged in the Senate to a deal that would ensure continuation of funding for agency operations.
At the Fed, Warsh, 55, is expected to favour lower interest rates but stop short of the more aggressive monetary easing linked to some other potential nominees.
With Powell's term ending in May, Warsh, if confirmed by the Senate, would take the helm of a central bank he has argued should scale back its role in the economy and rethink its approach to monetary policy.
"Markets are calibrating to Trump's pick of Kevin Warsh ... and the outlook for monetary policy," said Michael Hans, chief investment officer at Citizens Wealth, who also pointed to an unwinding of recent trading patterns with the US dollar gaining ground on Friday and precious metals selling off sharply.
Meanwhile, in earnings, Apple shares regained ground after earlier losses in the session a day after the iPhone maker released quarterly results. On the data front, producer prices increased more than expected in December, suggesting inflation could pick up in the months ahead.
"There's a combination of investor concerns around the Fed chair announcement, some mixed tech earnings and lingering inflation pressure as well as some uncertainty about a potential government shutdown even though it should be short-lived," said Angelo Kourkafas, senior global strategist at Edward Jones.
According to preliminary data, the S&P 500 lost 30.03 points, or 0.43 per cent, to end at 6,938.98 points, while the Nasdaq Composite lost 223.59 points, or 0.94 per cent, to 23,461.53. The Dow Jones Industrial Average fell 185.12 points, or 0.38 per cent, to 48,886.44.
The small-cap Russell 2000 index, which is more sensitive to interest rates, was underperforming the S&P 500 during the session.
The S&P's Materials index was leading declines among the S&P 500's 11 major industry sectors as US-listed gold and silver miners tumbled in sympathy with the massive selloff in gold prices and in silver.
Defensive consumer staples was leading gainers during Friday's session with Colgate-Palmolive leading its gains after the maker of toothpaste and soap forecast annual sales above Wall Street estimates on steady demand for household staples in markets such as Latin America and Europe.
Investors gave a mixed reception to megacap earnings reports this week with a stark warning: record capital-spending binges will be tolerated as long as the growth keeps coming.
Apple wrapped up the week with a forecast of higher-than-expected revenue growth of up to 16 per cent for the March quarter, but warned that rising memory-chip prices had started to pressure profitability.
Microsoft lost ground again on Friday after falling 10 per cent on Thursday for its deepest daily loss since March 2020 after its cloud revenue failed to impress, while Meta had jumped 10 per cent on Thursday.
After falling on Thursday following its results, Tesla shares rose on Friday after reports that SpaceX is exploring deals with the electric-vehicle maker and other companies run by Elon Musk.
SanDisk shares rallied after a better-than-expected third-quarter forecast as AI fuels storage demand. But KLA Corp shares tumbled even after the company beat Wall Street expectations for second-quarter profit and revenue.
with AP
Australian Associated Press
