Federal Reserve personnel shake-up stirs market turbulence: Long-term bond yields hit a six-month high, Tech Stocks decline accordingly

The call for a Warsh succession resurfaces, Wall Street on high alert

Recently, Trump confirmed former Federal Reserve Board member Kevin Warsh( as the preferred candidate to succeed Powell, attempting to pressure the next chair to cooperate with rate cut plans. The market initially welcomed this appointment prospect, but the reaction soon turned completely opposite—investors are worried about the Fed’s independence being compromised, causing long-term bond yields to rise sharply. The US 30-year Treasury yield surged to 4.84%, hitting the highest level since early September, highlighting deep market concerns over policy intervention.

“Rate cuts to 1% in a year” comments trigger chain reactions

Trump publicly expressed hope that the Federal Reserve’s next chair would seek his opinion on interest rate decisions, and during an interview, he revealed expectations that rates could fall to 1% or even lower within a year. While ostensibly aimed at reducing the $30 trillion government debt financing costs, this move has actually sparked doubts about the central bank’s independence. The US 2-year Treasury yield fell to 3.52%, but the 10-year rose to 4.18%, with the steepening of the 10-year–2-year yield curve reflecting market concerns over future inflation.

Global stock markets plummet, tech stocks lead declines

The bond market turbulence quickly spread to equities. All three major US indices declined, with the Nasdaq down 1.69%, the S&P 500 down 1.07%, and the Dow relatively modestly down 0.51%. Among them, chip giant Broadcom dropped over 11% after earnings, becoming the biggest loser in the tech sector. European stocks also declined, with Germany’s DAX 30 down 0.45% and the UK FTSE 100 down 0.56%.

Market participants believe that, besides Fed policy uncertainty, concerns about whether AI companies’ massive capital expenditures can match their returns have reignited, with risk sentiment clearly cooling.

Commodity markets volatile, crypto assets under pressure

Gold briefly rose 0.47% to $4,299.2 per ounce before retreating, WTI crude oil fell 0.67% to $57.5 per barrel, both reflecting risk asset revaluation. The crypto market also came under pressure, with Bitcoin down 0.05% in 24 hours, latest at $87,600; Ethereum down 0.37%, at $2,950. The US dollar index rose slightly by 0.06% to 98.39, while the yen appreciated 0.17%.

Hong Kong night session futures also weakened, with the Hang Seng Index futures closing at 25,735 points, down 242 points; the China Enterprises Index futures fell 81 points.

Inflation fears reignited, Fed officials call for caution

Chicago Fed President Goolsbee and Kansas Fed President Schemmel both stated on Friday that inflation risks remain their core reasons for opposing rate cuts and supporting the status quo. Although traders still expect two 25 bps rate cuts by the end of 2026, such hawkish voices suggest long-term US Treasury bonds face downside risks, further pushing the 30-year yield up to 4.86%.

Corporate outlook mixed, AI investments a double-edged sword

Broadcom’s Q4 earnings exceeded expectations, with net profit up 97% year-over-year to $8.5 billion, and AI chip sales reaching $11.07 billion, up 22%. The company expects AI chip sales to double to $8.2 billion in Q1, initially optimistic. However, Oracle’s rumored (later denied) data center delays triggered bond market panic; its $18 billion senior bonds issued in September have lost $1.35 billion, with related bond yields rising to 5.9%, approaching junk bond ratings, reflecting deep investor concerns over AI investment returns.

Goldman Sachs remains optimistic, sets S&P target at 7,600 next year

Goldman Sachs maintains a long-term bullish outlook on US stocks, reaffirming a 7,600 target for the S&P 500 next year, about 10% above current levels. The bank expects earnings per share for S&P 500 components to grow 12% next year, with AI productivity gains contributing about 0.4 percentage points, and further rising 10% in 2027.

Geopolitical shifts emerge

Signs of a thaw in US-Belarus relations appeared, with the US announcing the lifting of sanctions on Belarusian potash fertilizers. Lukashenko subsequently pardoned 123 prisoners, including Nobel Peace Prize laureate Bialiatski in 2022. Additionally, the US Treasury announced sanctions on six Venezuelan oil tankers, one of which flies the Hong Kong flag.

Elon Musk’s wealth further increases, SpaceX plans IPO

Musk’s SpaceX plans to go public in mid to late next year, with an estimated valuation of about $1.5 trillion. According to Bloomberg Wealth Index, Musk owns approximately 42% of the company. If this plan materializes, he will become the world’s first trillionaire, breaking personal wealth records.

Today’s key event highlights

China November retail sales, November industrial added value above scale YoY, Eurozone October industrial output MoM, Canada November CPI MoM, US December NY Fed manufacturing index, Fed Board member Mester speech, December NAHB housing market index, Williams Fed President’s economic outlook comments, etc., will further guide market expectations for Fed policy path and global economic outlook.