Trump Nominates Hawk Kevin Warsh for Fed Chair; Metals Crash President Trump announced plans to nominate former Fed Governor Kevin Warsh as the next Federal Reserve Chairman, triggering a historic sell-off in precious metals. Gold fell 8% and silver plunged almost 30% in a single session—their worst combined day since the 1980s—as markets rapidly repriced for a "hawkish" leader who typically favors higher interest rates and a stronger dollar.

US Dollar Hits Four-Year Low on Tariff Uncertainty The US dollar index dropped to its lowest point in four years, sliding 3% against a basket of currencies due to the "haphazard nature" of recent tariff announcements regarding Greenland, Iran, and Canada. While a weaker dollar makes US exports more competitive, it significantly reduces American purchasing power and imports inflation by making foreign goods more expensive. If this trend continues, the Federal Reserve may be forced to keep rates high to defend the currency, squeezing borrowers.

Medicare Advantage Rate Shock Crushes Health Insurers UnitedHealth and Humana shares plummeted ~20% after the Centers for Medicare & Medicaid Services (CMS) proposed a meager 0.09% payment rate increase for 2027, shocking analysts who expected a ~6% bump. With medical costs rising and government reimbursement flatlining, insurers may be forced to cut benefits or exit markets entirely, potentially reducing coverage options for the 35 million seniors enrolled in these private plans.

Fed Holds Rates Steady The Federal Reserve voted to keep interest rates unchanged at 3.50-3.75%, though two members dissented in favor of a cut. Complicating the picture, the Producer Price Index (PPI)—a measure of wholesale inflation—jumped 0.5% in December with the annual rate rising to 3.0%, hotter than expected. Hotter wholesale prices often trickle down to consumers in the coming months; this data, combined with a potential hawkish Fed Chair, suggests mortgage and auto loan rates may not fall as quickly as consumers hope.

Global Trade Realigns: Allies Strike Deals Without the U.S. The EU and India announced a massive free trade agreement to create a zone of 2 billion people, while Europe also advanced a historic pact with South America’s Mercosur bloc (covering 700 million people), though it faces new legal delays. Additionally, Canada signed a limited deal with China to cut tariffs on EVs and canola oil, drawing a furious rebuke and tariff threats from the White House. A structural shift is occurring where traditional allies are hedging against U.S. policy unpredictability by diversifying their trade partners.

Partial Government Shutdown Begins Congress failed to pass a spending package by the Friday midnight deadline, triggering a partial government shutdown impacting the Departments of Defense, Health and Human Services, and State.

Manufacturing and Durable Goods Show Surprise Strength Despite the gloom, the Chicago PMI expanded (54.0) for the first time since 2023, and Durable Goods Orders surged 5.3% in November. The "real" economy—factories and business investment—is accelerating even as consumer sentiment hits a 12-year low. This divergence suggests businesses are bullish on demand.

The Threshold: A reading below 50 signals contraction; above 50 signals growth. Manufacturing has been the weak link in the post-COVID recovery.

The Trade: If the print surprises to the upside (shows growth), it could signal a broader economic re-acceleration, benefiting industrial giants ($XLI ( ▲ 0.84% )) and raw materials ($XLB ( ▲ 2.12% )). If it stays deep in contraction, recession bears will grow louder, potentially dragging down cyclical stocks.

The Real Economy: While factories get the headlines, the Service sector makes up roughly 70% of the U.S. economy. The ISM Non-Manufacturing Index needs to stay robust to support the "Soft Landing" narrative. Weakness here is far more dangerous to the stock market than weakness in manufacturing.

Job Preview: ADP gives us a sneak peek at private hiring. While not always perfectly correlated with Friday's official government numbers, a "hot" ADP number could spook bond markets early, sending yields up.

The Goldilocks Scenario: We want to see Productivity UP and Unit Labor Costs DOWN. This means companies are becoming more efficient, protecting their profit margins even as they pay workers more. This is historically very bullish for Tech ($QQQ ( ▼ 1.54% )).

The Risk: If Unit Labor Costs spike, it implies "sticky" inflation, which forces the Fed to keep rates high.

Wage Watch: The most critical number might be Average Hourly Earnings. If wage growth accelerates unexpectedly, it reignites inflation fears. Bonds ($TLT ( ▲ 0.24% )) would likely sell off, driving mortgage rates higher.

Recession Radar: If the Unemployment Rate ticks up significantly, the narrative shifts from "Inflation" to "Recession." In that scenario, expect defensive sectors like Utilities ($XLU ( ▲ 1.46% )) to outperform while growth stocks struggle.

Sentiment: We close the week with Consumer Sentiment. If the jobs report is weak and sentiment drops, it confirms the consumer is cracking.