Kevin Warsh’s Senate Banking Committee confirmation hearing for Federal Reserve Chair on April 21 placed the central bank’s upcoming leadership transition in focus. Warsh, nominated to succeed Chair Jerome Powell when his term expires May 15, emphasized his commitment to operational independence and stated he had made no prior commitments on the direction of interest rates. The confirmation hold maintained by Thom Tillis was contingent on resolving a U.S. Department of Justice investigation into Powell. The DOJ confirmed this morning that it has closed the investigation and referred the matter to the Federal Reserve’s Inspector General, potentially clearing the path for Warsh’s confirmation.
Alongside these developments, the week’s economic releases reinforced the view that the U.S. economy is holding up well. March retail sales advanced a stronger-than-expected 1.7%, with the control group measure that feeds into gross domestic product rising 0.7%. Activity surveys also improved, with the April preliminary S&P Global Manufacturing Purchasing Managers’ Index rising to 54.0, its strongest reading in over a year, while the Services component recovered from below-50 territory in March. The final University of Michigan Consumer Sentiment reading for April was revised to 49.8 from the preliminary 47.6, with one-year inflation expectations edging down to 4.7% and the longer-run measure holding at 3.5%. Overall, the data suggest a resilient economy, though higher energy prices tied to the conflict in the Middle East may not yet be fully reflected.
Financial markets responded constructively to the week’s developments. The S&P 500 rose approximately 0.2% on the week, extending its recovery from the late-March lows and trading at its highest level so far this year, roughly 9% above where it stood at the end of March. First-quarter corporate earnings provided additional support, with blended S&P 500 results tracking near 13% growth year-over-year, though select technology names declined after cautious guidance. Treasury yields moved modestly higher, with the 2-year U.S. Treasury note at 3.78% and the 10-year at 4.30% as of this morning, reflecting the stronger economic data. West Texas Intermediate crude oil settled near $95 per barrel amid ongoing ceasefire negotiations between the U.S. and Iran. Gold pulled back to approximately $4,722 per ounce, continuing a gradual retreat in line with shifting geopolitical conditions.
Looking ahead, the Chandler team expects the Federal Reserve to hold the federal funds rate at 3.50% to 3.75% at the upcoming April 28-29 meeting. With the DOJ’s decision this morning to close the Powell investigation, potentially removing the final procedural barrier to Warsh’s confirmation, a leadership transition in May now appears likely. The Chandler team sees a possible 25 basis point reduction to the federal funds rate late this year, contingent on energy costs normalizing and core inflation remaining contained. Portfolios remain positioned conservatively as both uncertainty and the need for clarity remain elevated.
Next Week: Federal Open Market Committee Rate Decision, First Quarter Gross Domestic Product, Personal Income and Personal Spending, Personal Consumption Expenditures Price Index, Institute for Supply Management Manufacturing Index, S&P Global United States Manufacturing Purchasing Managers’ Index, Conference Board Consumer Confidence, Leading Economic Index (LEI), Durable Goods Orders, Housing Starts, and Building Permits.
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