Expectations of a change in the Federal Reserve Chair are heating up, US stocks retreat, gold and silver fluctuate, and the small-cap market continues to be under pressure.

Policy Shifts Impact Global Markets, Trump Fed Personnel Appointment Sparks Chain Reactions

Trump sent a major signal to the market—former Fed Governor Wosh is expected to become the top candidate to succeed Powell as Chair. Wall Street is thrilled, but the associated risks are also emerging. Trump emphasized that the next Chair should heed his opinions on interest rates, even explicitly stating he hopes to lower rates to 1% or below within a year. While this rhetoric aligns with market expectations for a loose monetary environment, it also exposes a core concern— the potential challenge to the Federal Reserve’s independence.

Powell will step down in May next year. During his tenure, he repeatedly rejected Trump’s calls for significant rate cuts. The new Chair candidate will undoubtedly set the future direction of monetary policy.

U.S. Treasury Yields Surge, Market Wary of Inflation Outlook

Following the announcement, the U.S. bond market responded accordingly. The 2-year Treasury yield fell to 3.52%, while the 10-year and 30-year yields continued to rise, with the 30-year soaring to 4.84%, hitting a new high since September. This “short dip, long rise” pattern reveals deep market concerns about long-term inflation.

Chicago Fed President Goolsbee and Kansas Fed President Schembri spoke on Friday, both opposing further rate cuts due to inflation worries. Their stance contrasts sharply with Trump’s expectations, indicating ongoing disagreements within the Federal Reserve on policy direction.

U.S. Stocks Decline, Tech Stocks Lead Down—Uncertainty in AI Outlook Grows

Amid rising bond yields and doubts about the returns from AI( companies, U.S. stocks retreated across the board. Dow fell 0.51%, S&P 500 dropped 1.07%, and Nasdaq declined 1.69%. European markets also declined: Germany DAX 30 down 0.45%, France CAC 40 down 0.21%, UK FTSE 100 down 0.56%.

Behind this correction, there is a market reassessment of AI application prospects. Investors are questioning whether these companies’ massive expenditures can translate into substantial profit growth.

Commodity and Forex Markets Fluctuate Slightly; Crypto Under Pressure

Gold rose 0.47% to $4299.2 per ounce, but gains are limited, reflecting investors’ modest demand for safe-haven assets. WTI crude oil fell 0.67% to $57.5 per barrel. The US dollar index edged up 0.06% to 98.39.

Cryptocurrency markets remain weak. Bitcoin declined 0.91% in the past 24 hours, currently trading at $92.89K; Ethereum rose 2.34% to $3.25K, showing clear divergence among the markets. Hong Kong Hang Seng Index futures closed at 25,735 points, down 242 points.

Goldman Sachs Optimistic on U.S. Stocks Next Year, But Only if AI Truly Creates Value

Goldman Sachs released its outlook for next year, believing that with the expansion of AI applications and the resilience of the U.S. economy, U.S. stocks could hit new highs again. The bank reaffirmed its 2025 target for the S&P 500 at 7,600 points, about 10% above current levels. Goldman Sachs forecasts a 12% earnings growth for S&P 500 components, with AI-driven productivity gains contributing approximately 0.4 percentage points.

However, this optimistic forecast depends on AI companies actually delivering commercial value.

Tech Giants’ Earnings Mixed; Oracle’s Credit Risk Hits New High

Broadcom delivered impressive results: net profit in Q4 increased 97% YoY to $8.5 billion, revenue rose 28% to $18 billion, surpassing market expectations. CEO Hock Tan indicated that Q1 AI chip sales are expected to double to $8.2 billion. After-hours, the stock rose over 3%.

In contrast, Oracle faces difficulties. Bloomberg reported that the completion deadline for its data centers with OpenAI was extended from 2027 to 2028. Oracle denied this, but the market remains unconvinced. The company’s $18 billion senior bonds issued in September have seen unrealized losses grow to $1.35 billion, and its CDS spread has widened to 1.71 percentage points, reaching junk bond levels.

Elon Musk Aims for Trillion-Dollar Wealth, SpaceX Plans IPO Next Year

Elon Musk’s space exploration company SpaceX is planning an IPO, targeting a valuation of about $1.5 trillion, potentially rivaling Saudi Aramco’s $1.7 trillion record. If Musk’s 42% stake is realized, he could become the world’s first trillionaire.

Today’s Key Focus

Pay close attention to China’s November retail sales YoY, industrial added value YoY, Eurozone October industrial output MoM, Canada November CPI MoM, US December NY Fed Manufacturing Index, speeches by Fed Governors Milan and Williams, and the US NAHB Housing Market Index.