Trump's nomination of Warsh to replace Jerome Powell when Powell's term ends in May is the culmination of a months-long contest that often resembled a public audition. Warsh, White House economic adviser Kevin Hassett, sitting Fed governor Christopher Waller, and Wall Street insider Rick Rieder were all in the run. 

Still, Warsh ultimately won the role. And the market's response was very subdued. Futures pared some of their losses but remained in the red. That's not serenity, but it's not hysteria either.

Warsh is widely seen as a comparatively moderate figure, especially in the context of Trump's escalating campaign to bend the central bank to his will. That's the paradox at the heart of this nomination: Warsh is a frequent Fed critic who has talked openly about monetary-policy "regime change," yet markets greeted him as a stabilizer.

That contradiction makes more sense once you look at what investors think they're getting. Warsh has recently aligned himself with Trump's preference for lower rates. But he's also known for being cautious about heavy monetary stimulus. In other words, he may cut rates, but he won't spray money around like it's a celebratory champagne bottle. 

Trump praised Warsh, saying that he's “central casting”, a "good person" and will “go down as one of the great Fed Chairmen, maybe the best." The compliment is so over-the-top that it becomes suspicious. When Trump praises someone this loudly, it usually means he expects something in return.

And Trump has made his expectations clear: he wants lower rates, fast. He has persistently attacked the Fed for refusing to cave to his demands. In August he named White House adviser Stephen Miran to the Fed, where Miran has become a leading proponent of aggressive rate cuts. Trump has also tried to force out Fed Governor Lisa Cook in a fight now before the Supreme Court. And in January, his Justice Department opened a criminal probe into Powell, an act Powell called a pretext to pressure the Fed into setting monetary policy as Trump wishes.

Which is why Warsh's nomination is being interpreted, strangely, as a de-escalation. He served as a Fed governor from 2006 to 2011, during the financial crisis, when he voice concerns that massive bond purchases would stoke inflation. He eventually resigned, concerned about the long-term implications of the Fed's interventions. His inflation fears, in retrospect, proved misplaced. But his obsession with the Fed's balance sheet never went away.

Now he argues that shrinking the balance sheet would allow the Fed to redeploy excess liquidity into the real economy by lowering the policy rate. Warsh has also criticized the Fed for underestimating productivity growth, especially productivity fuelled by artificial intelligence.

AI may raise productivity. It may also create pockets of speculative frenzy and capital misallocation, something markets have been visibly wrestling with. Just look at the recent tech chaos: Microsoft plunged 10% yesterday after cloud revenue disappointed, triggering a broader sell-off. The Nasdaq fell more than 2% intraday before ending down 0.7%. 

Markets went full rollercoaster, as investors once again obsessed over the same uncomfortable question: will all that AI spending ever turn into real profits, or just impressive invoices? The chaos exposed a growing split: chipmakers and AI "picks-and-shovels" look indispensable, while software names are suddenly treated like they're one clever tool away from irrelevance.

This morning December Producer Price Index didn't just come in hot, it came in politically inconvenient. Producer prices rose 3.0% year-over-year (above the 2.8% estimate) and jumped 0.5% month-over-month (versus 0.2% expected), a reminder that inflation pressure isn't some ghost story told by central bankers to scare Congress into behaving. PPI matters because it's upstream: it's the pricing stress building inside supply chains and corporate cost structures before it hits consumers, meaning the "mission accomplished" narrative on inflation is still premature. A print like this is the kind of data that forces reality back into the room for Warsh: you can believe in an AI-driven productivity miracle and still admit that prices are rising now. If he's serious about a "regime change," his first test won't be writing essays about the balance sheet, it'll be proving he can navigate inflation that refuses to cooperate with politics, forecasts, or wishful thinking.

He may calm markets today because he seems less pliant than other contenders. But he is still being installed by a president who has openly tried to dominate the institution. If he confirmed, he will face a defining test almost immediately: will he treat Trump's demands as guidance, or as interference?

Today's economic highlights:

On today's agenda: the Producer Price Index in Australia; housing starts in Japan; GDP growth rate in France; housing prices in the United Kingdom; GDP growth rate and inflation in Spain; KOF leading indicators in Switzerland; unemployment and GDP growth rate in Germany; GDP growth rate in Italy; consumer credit and mortgage lending in the United Kingdom; GDP growth rate and unemployment in the Euro Area; inflation in Germany; in the United States, the Producer Price Index, Chicago PMI, and a Fed speech; GDP growth rate in Canada. See the full calendar here.

  • Dollar index:96,638
  • Gold: $5,014
  • Crude Oil (BRENT): $69.21 (WTI) $65.12
  • United States 10 years: 4.24%
  • BITCOIN: $82,737

In corporate news:

  • Apple plans to prioritize premium iPhone releases in 2026 amid a memory shortage and supply chain constraints.
  • Amazon is in talks to invest up to $50 billion in OpenAI.
  • Microsoft signs a $750 million cloud service agreement with Perplexity AI for Azure services.
  • Blackstone's private credit fund saw a notable surge in investor withdrawal requests, highlighting pressure on private credit vehicles like BCRED. 
  • Google launches Vertex AI extensions for .NET developers (enabling integration with Google's Gemini models). 
  • UnitedHealth Group had its price target reduced by Wells Fargo to $370 from $400, with Overweight maintained.
  • Southwest Airlines was upgraded to Outperform by BMO Capital with a new $57.50 price target.
  • Medtronic was initiated with an Outperform rating and $121 price target by CICC.
  • International Paper was upgraded by Wells Fargo to Equalweight with a $40 price target.
  • Kenvue was downgraded to Hold by Jefferies, trimming its price target to $18.
  • Arthur J. Gallagher & Co. was downgraded to Neutral by Cantor Fitzgerald, with a reduced price target of $282.
  • Sandisk was upgraded to Outperform by Raymond James with a $725 price target.
  • Ameriprise Financial was raised to Neutral by Piper Sandler with a $530 price target.
  • DeepSeek received conditional Chinese approval to buy Nvidia H200 AI chips.
  • Arista Networks was initiated at Buy by William O'Neil.
  • KLA posted stronger-than-expected quarterly results, though its shares dipped premarket.
  • Marathon Petroleum had its contract offer rejected by the United Steelworkers union.
  • Stryker raised its annual profit forecast on strong device sales.
  • Blackstone is considering selling Interplex's ICT unit valued at over $1 billion.
  • OpenAI (backed by Microsoft) is preparing groundwork for a possible IPO as early as Q4, targeting a high valuation.
  • Roblox faces investigation by the Dutch regulator over risks to minors under the EU Digital Services Act.
  • Rocket Lab launched an Earth-imaging satellite for a Korean constellation.
  • Taiwan's economy rebounded strongly in Q4, driven by AI chip demand.
  • Abbott received German cartel approval to acquire Exact Sciences.
  • Kimberly-Clark and Suzano's joint venture could face a U.K. competition probe.
  • SpaceX is in merger talks with xAI and other Musk entities ahead of its IPO.
  • American Airlines plans to resume daily flights to Venezuela pending FAA and government approvals after U.S. airspace reopening.
  • Boeing received a firm order for 30 737 MAX jets from Air India as part of fleet expansion plans.

Analyst Recommendations:

  • Aecom: Zacks downgrades to underperform from neutral and reduces the target price from USD 103 to USD 83.
  • Ameriprise Financial, Inc.: Piper Sandler & Co upgrades to neutral from underweight with a price target raised from USD 434 to USD 530.
  • Arista Networks, Inc.: William O'Neil & Co Incorporated initiates coverage with a buy recommendation.
  • Arthur J. Gallagher & Co.: Cantor Fitzgerald downgrades to neutral from overweight and reduces the target price from USD 370 to USD 282.
  • Celanese Corporation: On Field Investment Research upgrades to outperform from underperform and reduces the target price from USD 115 to USD 58.
  • Corning Incorporated: UBS upgrades to buy from under review with a price target raised from USD 109 to USD 125.
  • Deckers Outdoor Corporation: KGI Securities Co Ltd upgrades to outperform from neutral with a price target raised from USD 94 to USD 129.
  • Dow Inc.: On Field Investment Research upgrades to outperform from sell and reduces the target price from USD 50 to USD 32.
  • Hexcel Corporation: Morgan Stanley upgrades to market weight from underweight and raises the target price from USD 67 to USD 90.
  • International Paper Company: Wells Fargo upgrades to market weight from underweight and raises the target price from USD 36 to USD 40.
  • Kenvue Inc.: Jefferies downgrades to hold from buy and reduces the target price from USD 23 to USD 18.
  • Ppg Industries, Inc.: On Field Investment Research upgrades to outperform from neutral with a price target raised from USD 130 to USD 140.
  • Royalty Pharma Plc: UBS upgrades to buy from neutral with a price target raised from USD 38 to USD 49.
  • Southwest Airlines Co.: BMO Capital Markets upgrades to outperform from market perform and raises the target price from USD 43 to USD 57.50.
  • Spotify Technology S.a.: Citi upgrades to buy from neutral with a target price of USD 650.
  • Appfolio, Inc.: Piper Sandler & Co maintains its overweight recommendation and reduces the target price from USD 350 to USD 245.
  • Coreweave, Inc.: Arete Research maintains its buy recommendation and raises the target price from USD 208 to USD 251.
  • Ge Vernova Inc.: Johnson Rice maintains its buy recommendation and raises the target price from USD 720 to USD 900.
  • General Motors Company: CICC maintains its outperform recommendation and raises the target price from USD 80 to USD 100.
  • Kla Corporation: JP Morgan maintains its overweight recommendation and raises the target price from USD 1485 to USD 1950.
  • Lam Research Corporation: CITIC Securities Co Ltd maintains its buy recommendation and raises the target price from USD 165 to USD 275.
  • Lyondellbasell Industries N.v.: On Field Investment Research maintains its neutral recommendation and reduces the target price from USD 102 to USD 49.
  • Meta Platforms, Inc.: CTBC Securities Investment Service Co LTD maintains its buy recommendation and raises the target price from USD 700 to USD 855.
  • Roblox Corporation: Roth Capital Partners maintains its neutral recommendation and reduces the target price from USD 120 to USD 78.
  • Royal Caribbean Group: Jefferies maintains its hold recommendation and raises the target price from USD 275 to USD 334.
  • Rtx Corporation: President Capital Management Corp maintains its buy recommendation and raises the target price from USD 167 to USD 230.
  • Sandisk Corporation: Cantor Fitzgerald maintains its overweight recommendation and raises the target price from USD 550 to USD 800.
  • Servicenow, Inc.: Cmb International Capital Corp Ltd maintains its buy recommendation and reduces the target price from USD 1180 to USD 215.
  • Southwest Airlines Co.: BMO Capital Markets upgrades to outperform from market perform and raises the target price from USD 43 to USD 57.50.
  • V.f. Corporation: Piper Sandler & Co maintains its neutral recommendation and raises the target price from USD 14 to USD 18.