Wall Street Brief (January 31): US stocks closed lower across the board on Friday, with market sentiment slightly cooling but still leaning optimistic; Trump nominates new Fed chair, triggering a flash crash in gold and strengthening the US dollar

Summary: US stocks closed lower across the board on Friday, capping off January with a somewhat lackluster finish. Overall market sentiment cooled slightly but remained optimistic. The S&P 500 fell 0.43%, the Nasdaq dropped 0.94%, the Dow Jones declined 0.36%, and the Russell 2000 small-cap index slid 1.55%. Trump announced the nomination of former Fed Governor Kevin Warsh to succeed Powell as Fed Chair, a move seen by the market as hawkish. Interest-rate-sensitive assets came under pressure, with gold leading the decline from its historical high. In major asset classes, gold plummeted 9.14%, marking the largest single-day drop in this rally, while the US Dollar Index strengthened, rising 1.01%. Crude oil edged up 0.30%, and Bitcoin dipped slightly by 0.64%. Despite the month-end pullback, January overall recorded positive gains, with the Russell 2000 index rising over 5%, outperforming major indices.

I. Major Events

1. Trump nominated Kevin Warsh as Fed Chair

Trump announced on social media Friday the nomination of former Fed Governor Kevin Warsh to replace Powell, ending months of speculation. Warsh is considered a monetary policy hawk, and the market expects him to be more cautious regarding inflation and interest rate cuts. Following the announcement, the dollar strengthened, long-term Treasury yields rose, with the 10-year yield climbing to 4.26%, pressuring interest-rate-sensitive assets like gold. If confirmed by the Senate, Warsh will officially take office in May.

2. Gold flash crashes nearly from its all-time high

Gold experienced the sharpest single-day selloff in this bull market, plummeting 9.14%. Market expectations for Warsh's hawkish stance rapidly increased, strengthening the dollar. Coupled with profit-taking after prior gains, selling pressure was concentrated and triggered technical stop-losses, causing a 'flash crash' in prices. Silver also plunged sharply, and precious metals-related mining stocks weakened significantly, with the materials sector dropping 1.46%.

3. Verizon reported its best earnings performance since 2008

Verizon delivered impressive earnings, with its stock price surging 11.83%, marking the best single-day performance since 2008. Under new CEO Dan Schulman’s leadership in his first full quarter, the company added 616,000 postpaid subscribers, significantly higher than the market's expectation of 420,000. Additionally, Verizon raised its 2026 profit guidance and announced a 4% dividend increase, providing solid support to the Dow Jones Industrial Average on the day, contrasting with weakness in tech stocks.

II. Major Trends

Several major indices are showing short-term adjustment signals. The two-week gains/losses for SPY, QQQ, SPYG, and MAGS have all turned negative from positive. Following a strong rebound in January, the market has entered a technical correction window, while uncertainty over policy direction due to Warsh's nomination is putting pressure on interest-rate-sensitive growth stocks. Value-oriented stocks remain dominant. Over a three-month period, SPYV rose 3.97%, outperforming SPYG's 1.48%, as funds continue rotating from high-valuation growth sectors to traditional value sectors.

Industrial stocks have outperformed tech stocks over the long term. Over a three-month horizon, DIA gained 5.03%, significantly surpassing QQQ's 1.49%. This reflects growing market impatience regarding when AI capital expenditures will yield returns: companies that can clearly articulate their return paths are more likely to receive valuation premiums, whereas narratives emphasizing only investment scale are losing marginal appeal.

III. Market Sentiment

Overall market sentiment has slightly cooled but remains optimistic. The VIX volatility index closed at 17.01, up 0.77%, still at a relatively low level. Despite asset price fluctuations triggered by Warsh's nomination, including sharp declines in gold and a stronger dollar, overall volatility has not risen significantly, indicating restrained market repricing of macroeconomic trajectories.

The CNN Fear & Greed Index fell from 61 to 58, still within the 'greed' range but showing some contraction. Rising hawkish expectations, tech stock corrections, and sharp declines in precious metals have cooled sentiment; however, monthly returns remained positive, and defensive sectors performed steadily, indicating that risk appetite has not markedly shifted toward conservatism.

IV. Market Scan

1. Index ETFs

All four major index ETFs closed lower on Friday. The Dow ETF (DIA) saw the smallest decline at just 0.24%, supported by traditional blue chips like Verizon and Chevron; the Nasdaq ETF (QQQ) dropped 1.20%, weighed down by profit-taking in large-cap tech stocks and significant declines in semiconductor equipment shares; the small-cap ETF (IWM) fell 1.41%, performing the worst as small caps are more sensitive to interest rates and were notably pressured after the nomination news. However, on a monthly basis, small caps still gained over 5% in January, emerging as the biggest winners.

2. Industry Sectors

Sector performance showed clear differentiation between defensive and growth sectors. Consumer staples (XLP) led gains with a 1.68% rise, as funds flowed into more stable-yield directions amid hawkish expectations; energy (XLE) rose 1.07%, supported by Chevron's earnings and stabilizing oil prices. Technology (XLK) led declines with a 2.04% drop, dragged down by profit-taking in heavyweight stocks and weakening segments of hardware and semiconductors; materials (XLB) fell 1.46%, hit hard by sharp declines in precious metals, with significant pullbacks in mining stocks like Newmont and Freeport-McMoRan.

3. Seven Major Tech Stocks

Significant divergence emerged within M7 stocks. Tesla (TSLA) rose 3.32% to lead gains, buoyed by rumors about SpaceX considering a merger with Tesla or xAI, with trading volume reaching 82.5 million shares, above average. Meta (META) fell 2.95% to lead declines, experiencing profit-taking after a strong rally the previous trading day, while its 2026 capital expenditure guidance of $115-135 billion kept the market cautious about the intensity of investments.

4. Chinese概念股

Chinese concept stocks weakened overall, with strength in the US dollar and declining risk appetite jointly pressuring emerging market assets. The China Internet ETF (KWEB) fell 2.51%, with Bilibili (BILI) dropping 3.95% to lead sector declines, while Futu (FUTU) fell 1.40%, showing relative resilience. Other major Chinese concept stocks generally declined by around 2%-3%, with sector moves largely tracking broader market adjustments without significant new stock-specific negatives.

5. Cryptocurrencies and related stocks

Bitcoin's latest price is around $84,000, down 0.64% over the day, continuing its recent volatility (quote time: Eastern Time 19:30). Performance among related stocks diverged: MicroStrategy (MSTR) rose 4.55% against the trend, showing technical recovery after a sharp drop in the previous session; mining stock Riot (RIOT) plunged 8.84%, diverging from MSTR’s movement, indicating further divergence in capital preference within the sector and more stringent market valuation for high-cost miners.

$NASDAQ 100 Index (.NDX.US)$ $Invesco QQQ Trust (QQQ.US)$ $Dow Jones Industrial Average (.DJI.US)$ $State Street® SPDR® Dow Jones Industrial Average® ETF Trust (DIA.US)$ $Russell 2000 Index (.RUT.US)$ $iShares Russell 2000 ETF (IWM.US)$ $Roundhill Magnificent Seven ETF (MAGS.US)$ $USD (USDindex.FX)$ $U.S. 10-Year Treasury Notes Yield (US10Y.BD)$ $iShares 20+ Year Treasury Bond ETF (TLT.US)$ $XAU/USD (XAUUSD.CFD)$ $CBOE Volatility S&P 500 Index (.VIX.US)$ $Bitcoin (BTC.CC)$ $BTC/USD (BTCUSD.CC)$ $Ethereum (ETH.CC)$ $ETH/USD (ETHUSD.CC)$ $iShares Ethereum Trust ETF (ETHA.US)$ $NVIDIA (NVDA.US)$ $Tesla (TSLA.US)$ $Meta Platforms (META.US)$ $Amazon (AMZN.US)$ $Alphabet-C (GOOG.US)$ $Microsoft (MSFT.US)$ $Apple (AAPL.US)$

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