Following a week where investors digested a tech stock sell-off, sharp swings in precious metals, and news of former U.S. President Trump's nomination of Kevin Warsh for the next Federal Reserve Chair, the three major U.S. stock indices closed lower on Friday—the Dow Jones fell 0.36%, the S&P 500 dropped 0.43%, and the Nasdaq Composite declined 0.94%. However, weekly changes were minimal—the Dow fell 0.4% for the week, the S&P 500 gained 0.3%, and the Nasdaq dipped 0.2%.
Some of the most intense stock swings last week originated from the technology sector. Despite both Meta Platforms, Inc. (META.US) and Microsoft (MSFT.US) announcing higher spending targets in their latest earnings reports, the market's reaction to each was starkly different—Meta closed up 10.4% on Thursday and gained 8.8% for the week, while Microsoft closed down nearly 10% on Thursday and fell 7.7% for the week.
Meta's core metrics for the fourth quarter of 2025 significantly exceeded market expectations, while its expenditure continued to climb—capital expenditures for 2026 are projected to reach $115-135 billion, far surpassing market expectations of around $110.6 billion. The market perceives Meta as being in a virtuous cycle of "profits fueling computing power," using cash flow from its core advertising business to aggressively catch the AI wave.
Although Microsoft's core financial metrics for its second fiscal quarter of 2026 (ended last December) also surpassed expectations, a slight deceleration in Azure growth was interpreted as a signal that the AI-driven cloud growth story might face volatility. Adding to market pressure was Microsoft's surging capital expenditures—second-quarter capex hit $37.5 billion, a sharp 66% year-on-year increase, exceeding analyst expectations of $36.2 billion.
Simultaneously, Trump's nomination of former Fed Governor Warsh as the next Fed Chair also pressured the U.S. stock market. Warsh's stance is considered relatively hawkish, with a stronger inclination to preserve the Fed's independence, an expectation that weakened market anticipation for the Fed's accommodative monetary policy.
Furthermore, Warsh is a staunch supporter of the Fed's balance sheet reduction. In multiple speeches over the past year, he repeatedly stated that the Fed's aggressive bond-buying program over the years had gone too far and could drag it into the political quagmire of fiscal policy.
Some market participants warned that Warsh might favor accelerating the reduction of the balance sheet at the expense of interest rate cuts, creating a unique policy mix unfavorable for expanding liquidity in stock and bond markets. Trump's nomination still requires Senate approval.
Notably, if North Carolina Republican Senator Thom Tillis maintains his stance—to block any Fed nominations until the Justice Department completes its investigation into current Fed Chair Powell—the process could face delays.
Friday's decline in U.S. stocks was also partly influenced by spillover effects from sharp volatility in the precious metals market. On Friday, spot gold fell over 9%, spot silver plummeted nearly 27%, and spot platinum dropped close to 18%.
Market observers noted that the sharp decline in gold and silver prices was initially triggered by the news of Warsh's nomination but accelerated noticeably during afternoon trading in the U.S. East. Funds that had previously flooded into the precious metals market began taking concentrated profits, coupled with a rapid rise in the U.S. dollar index, making dollar-denominated gold and silver significantly more expensive for overseas investors.
Additionally, Warsh's potential appointment was seen as supportive of dollar stability, shaking the trading logic of "precious metals replacing the dollar as the global reserve asset." Data showed the U.S. dollar index rose about 0.8% on Friday, clearly pressuring precious metals.
On the trading front, forced liquidations and deleveraging were considered key factors amplifying the declines. As gold and silver prices plummeted, margin calls triggered a chain reaction, forcing investors to sell passively, leading to a stampede-like downturn.
After a volatile week, market sentiment has turned cautious. At the time of writing, futures for all three major U.S. stock indices were declining. Spot gold fell 0.66% to $4,833 per ounce; spot silver rose over 3% to $87.80 per ounce. Brent crude futures fell over 4% to $67.55 per barrel; WTI crude futures dropped over 2% to $63.46 per barrel.
Bitcoin also warrants attention. In the early hours of February 1st Beijing time, Bitcoin once fell to $75,719, hitting its lowest level since April 2025. At the time of writing, Bitcoin was at $77,715. Previous instances where Bitcoin declines dragged down U.S. stocks serve as a caution for investors.
Following a major sell-off last October, the cryptocurrency market has remained clouded, with overall sentiment very subdued. The delayed implementation of new market structure regulations for the U.S. crypto industry has weakened investor interest in digital assets. The lack of sustained buying has led to renewed questioning of Bitcoin's role in asset allocation.
In the coming week, investor attention will focus on the U.S. January nonfarm payrolls report due Friday. Data related to manufacturing and services, as well as the University of Michigan's consumer sentiment index, will also be key focal points.
On the corporate earnings front, another busy week is ahead. Two "Magnificent Seven" members—Alphabet (GOOGL.US) and Amazon.com (AMZN.US)—will report earnings on Wednesday and Thursday respectively, with other tech giants like Palantir (PLTR.US) and AMD (AMD.US) also reporting this week.
Outside the tech sector, Disney (DIS.US), PepsiCo (PEP.US), Eli Lilly (LLY.US), Novo Nordisk (NVO.US), Toyota (TM.US), and Philip Morris (PM.US) will also release their financial results.
Economists expect U.S. nonfarm payrolls to have increased by 65,000 in January, with the unemployment rate likely holding at 4.4%. However, in the early hours of January 31st local time, funding for several U.S. federal government departments ran out. As a new budget had not been passed, many government departments faced another "shutdown," with the Labor Department, responsible for compiling employment data, among the affected agencies.
Although the Senate finally passed a spending bill funding most federal departments on January 30th local time, the bill still needs House approval, and House members are not in Washington, scheduled to return only on Monday, February 2nd.
Some market participants had worried this shutdown could delay the January nonfarm payrolls report, but other analysis suggested the practical impact on government operations was limited.
Middle East tensions will continue to be a major factor influencing international oil prices. Affected by tensions over potential U.S. military action against Iran and the possible blockade of the Strait of Hormuz, oil prices have risen about 7% over the past five trading days.
It is reported that Ali Larijani, Secretary of Iran's Supreme National Security Council and advisor to the Supreme Leader, posted on social media on the evening of January 31st, stating, "Contrary to the artificially created media war atmosphere, a negotiation framework is gradually taking shape." International media widely interpreted this as progress towards Iran initiating talks with the U.S.
Trump said in an interview on January 31st that Iran is negotiating with the United States. Recently, the U.S. has持续向伊朗施压, deploying multiple warships, including an aircraft carrier, in the Middle East, threatening military intervention.
Earlier on January 31st, social media was filled with rumors about the assassination of the commander of the Iranian Islamic Revolutionary Guard Corps Navy, drone attacks on naval bases, and explosions in multiple locations. Iranian media debunked these rumors one by one, stating the claims were untrue.
"A Powerful Resume to Lead the Fed" As a former Fed Governor and seasoned economic figure with experience spanning Wall Street and the White House, Warsh's nomination not only signals a potential philosophical shift in U.S. monetary policy but is also poised to profoundly impact American consumers, financial markets, and the global economic trajectory.
Reviewing Warsh's career, his extensive experience in key roles forms the foundation for his candidacy as the new Fed Chair. In 2006, Warsh was nominated by former President George W. Bush to join the Federal Reserve Board, serving as a Governor until 2011, making him one of the youngest members in the institution's history.
He was fully involved in designing emergency rescue policies during the global financial crisis, including emergency lending programs to stabilize credit markets and coordination related to the Troubled Asset Relief Program (TARP), accumulating practical experience in handling complex economic crises.
Additionally, he graduated from Stanford University, holds a law degree from Harvard, previously worked in investment banking at Morgan Stanley, and served as a Special Assistant for Economic Policy at the White House, combining academic depth, financial practice, and policy-making perspective.
Deutsche Bank economists noted in a client report: "Warsh possesses a powerful resume to lead the Fed, with a background somewhat similar to Chairman Powell's."
Trump's nomination directly targets his core policy demand—pushing for significant interest rate cuts. Trump, in his nomination statement, praised Warsh as "fully meeting the ideal candidate criteria and certainly won't disappoint," underpinned by expectations for Warsh to promote accommodative monetary policy.
From a policy expectation perspective, Warsh's nomination would break from the "pragmatic, consensus-driven" monetary policy framework of the Powell era, shifting towards a direction more focused on inflation control and policy independence.
Although Trump expects him to push for aggressive rate cuts, Warsh's policy stance exhibits distinct characteristics of a "hawkish foundation + pragmatic flexibility." As a public critic of Fed policy in the post-financial crisis era, Warsh warned that large-scale asset purchases and near-zero rates could distort markets and undermine long-term price stability, and voted against the second round of quantitative easing.
He has repeatedly criticized the Fed for "mission creep," called for "institutional change," and believes the current Fed policy framework suffers from a credibility deficit. This implies that, compared to Powell, Warsh has lower tolerance for inflation and may be more inclined to prevent inflation risks through policy tightening rather than simply迎合 short-term economic stimulus needs.
However, market analysis generally believes Warsh is not a rigid ideological hawk. Krishna Guha, Head of Global Policy and Central Bank Strategy at Evercore ISI, pointed out that Warsh's hawkish reputation and independent image make it easier for him to build consensus within the FOMC, potentially facilitating 2-3 rate cuts this year, addressing government demands while balancing inflation control objectives.
Tobin Marcus, an expert at Wolfe Research, predicted that Warsh might agree with the policy logic that "productivity growth supports宽松利率," but final decisions will still be constrained by economic data, unlikely to completely脱离 the Fed's traditional "data-dependent" framework.
"A Macro Single Bet on AI" Across the entire economic system, there is a growing sense that all roads seem to lead to AI. When Alphabet and Amazon.com report earnings on Wednesday and Thursday respectively, investors will once again scrutinize the willingness of large tech companies to commit capital in the face of this opportunity.
Like other "Magnificent Seven" members, both companies are expected to raise capital expenditure expectations, vying for advantageous positions in the unfolding AI arms race.
Kyle Rodda, an analyst at Capital, stated: "Concerns about the 'return on investment in AI' are resurfacing, raising questions about valuations." He noted that the market's harsh reaction to Microsoft's capex scale "suggests diminishing returns on AI investments, while growth room is shrinking with valuations at extreme levels and the market priced for near perfection."
Torsten Slok, Chief Economist at Apollo, said in a report last Friday that the rapid膨胀 of spending scale is also beginning to pressure debt markets, with the shift towards debt financing for AI "increasing concentration and correlation risks."
Slok stated: "Exposure to AI is becoming ubiquitous across investment portfolios, seemingly achieving diversification across issuers and industries, but is actually increasingly masking a macro single bet on AI. The capex cycle, initially supported mainly by internal funds, is rapidly evolving into a financing event."
Furthermore, there is the issue of raw materials within the AI supply chain. Beyond the tech companies themselves, investors will continue monitoring trading conditions for various commodities underpinning AI infrastructure. Over the past few months, prices for both precious and base metals have risen significantly, despite the sharp correction last Friday.
The impact of AI on the labor market and economic growth also warrants close attention. According to U.S. Bureau of Labor Statistics data, job growth in 2025 was明显弱于 the previous year—584,000 new nonfarm payrolls were added in 2025, compared to 2 million in 2024. Meanwhile, GDP continues to grow.
U.S. economic growth indicators for the third quarter of 2025 registered an annualized rate of 4.4%, higher than the 3.8% in the second quarter, raising questions about the source of productivity gains and where to attribute them. Investors will gain more clues about U.S. fourth-quarter GDP changes in February.
Chris Zaccarelli, Chief Investment Officer at Northlight Asset Management, said: "The U.S. economy is operating at a very high level; a 4.4% real growth rate is significantly above the norm and is likely to gradually decline within the year. But if it remains above 3% for the full year, it could deliver double-digit returns for the stock market."
He added: "It's often said the stock market is not the economy, and vice versa. However, higher corporate profits do drive stock prices, and as long as productivity and output achieve sustainable increases, enabling companies to significantly boost profits, we should expect the market to rise accordingly."
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