The Federal Reserve personnel changes have triggered a wave, causing sharp fluctuations in the bond market, and tech stocks in the US stock market are under pressure and declining.

Federal Reserve Chair Succession Sparks Turmoil

Trump announced that former Federal Reserve Board member Waller will succeed Powell as Federal Reserve Chair, and Wall Street responded positively. However, Trump also emphasized that the new chair should seek his opinion on interest rates and explicitly expressed hope to see rates drop to 1% or lower within a year. This statement immediately triggered market concerns about the independence of the Federal Reserve, as rate cuts would directly impact U.S. government bond financing costs and the large total amount of U.S. debt.

Powell’s term will expire next May. He has repeatedly refused Trump’s aggressive rate cut requests, and their policy differences have long existed. Waller’s nomination is seen as more trustworthy by Wall Street compared to other candidates, with markets generally believing Waller will better balance political pressure and monetary policy independence.

Bond Yields Surge, Reflecting Inflation and Policy Uncertainty

Following Trump’s statement, U.S. long-term bonds came under pressure, with the 30-year Treasury yield rising to 4.84%, the highest since September, reflecting market concerns about long-term inflation prospects. Short-term bonds showed the opposite trend, with the 2-year Treasury yield falling to 3.52%, indicating traders expect the Fed to still have room to cut rates before the end of 2026.

Chicago Fed President Goolsbee and Kansas Fed President Smith both stated that inflation concerns are the main reasons they maintain their current policy stance. This further intensifies market expectations of downside risks for U.S. Treasuries.

Global Stock, Bond, and Commodity Markets Drop

As bond yields rise and uncertainty about AI prospects increases, market risk sentiment has significantly cooled. U.S. stocks declined across the board, with the Dow down 0.51%, the S&P 500 down 1.07%, and the Nasdaq down 1.69%. Tech stocks especially came under pressure, with Broadcom plunging over 11% in after-hours trading despite strong Q4 earnings.

European markets also declined, with Germany’s DAX 30 down 0.45% and the UK FTSE 100 down 0.56%. Gold rose slightly by 0.47% to $4,299.2 per ounce but failed to sustain the rally. WTI crude oil fell 0.67% to $57.5 per barrel.

Cryptocurrency markets were also affected, with Bitcoin at $87,750, up 0.22% over 24 hours; Ethereum at $2,950, down 0.34%. The US dollar index rose slightly by 0.06% to 98.39.

Mixed Corporate Earnings and AI Investment Outlook Raises Doubts

Broadcom beat expectations in Q4, with net profit up 97% year-over-year to $8.5 billion, and revenue up 28% to $18 billion. The company expects Q1 revenue to be around $19.1 billion, up 28%. CEO Hock Tan said AI chip sales in Q1 are expected to double to $8.2 billion. Despite strong earnings, the stock fell sharply after hours, reflecting market concerns over AI investment returns.

Oracle faced greater pressure. Bloomberg reported delays in completing data centers in collaboration with OpenAI, which Oracle immediately denied. However, investor confidence has been damaged, as the company’s $18 billion senior bonds issued in September are now trading at a loss of over $1.35 billion. The spread on its 5-year credit default swaps for bonds maturing in 2035 widened to 1.71 percentage points, with a yield of 5.9%, above the average for high-yield bonds.

Goldman Sachs Maintains Optimism, Elon Musk Poised to Become First Trillionaire

Despite short-term market setbacks, Goldman Sachs remains optimistic about U.S. stocks through 2026, reaffirming the S&P 500 target at 7,600 points, about 10% above current levels. The bank expects earnings per share for S&P 500 companies to grow 12% next year, with AI productivity gains contributing 0.4 percentage points to this increase.

SpaceX plans to go public in mid to late next year, with an estimated valuation of around $1.5 trillion, potentially becoming one of the world’s largest private companies by valuation. According to Bloomberg Wealth Index, Musk owns about 42% of SpaceX. If the IPO reaches the target valuation, he could become the world’s first trillion-dollar billionaire.

Geopolitical Developments Show Signs of Easing

Relations between the U.S. and Belarus show signs of improvement. The U.S. announced the lifting of sanctions on Belarusian potash fertilizers, and Belarusian President Lukashenko decided to pardon 123 prisoners, including Nobel Peace Prize laureate Bialiatski. The U.S. stated that as relations normalize, more sanctions will be lifted.

The U.S. Department of the Treasury also issued sanctions, listing six Venezuelan oil tankers involved in funding from the Maduro regime. One of these, the TAMIA, flying the Hong Kong flag, is operated by a UK company.