Market RecapHIGH
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Kevin Warsh has been sworn in as Federal Reserve chair, and markets are already weighing what a more reform-minded Fed could mean for rates. The immediate focus is not a sudden policy shock, but the chance of tighter money later this year and a slower, more deliberate shrinkage of the Fed’s huge balance sheet.
The new Fed chair matters because the Fed sets the price of money. If markets think Kevin Warsh will lean harder against inflation, borrowing costs move up first, and that hits the most rate-sensitive corners of the market: homebuilders, mortgage lenders, and other businesses that depend on cheap financing.
The next layer is a split inside the financials. Higher rates can help banks earn more on loans if deposit costs lag, but they can also force banks to pay savers more, mark down bond holdings, and face weaker borrowers. That is why the judged sector impact is mixed rather than uniformly positive.
The real test will be follow-through: balance-sheet runoff, the tone of Fed speeches, and whether rate expectations keep climbing. If Warsh talks reform but keeps policy steady, the move can fade; if the message turns steadily tighter, pressure on housing, long-duration tech, and leveraged balance sheets gets louder.
Higher rates make future growth look less valuable in the market, which usually hurts software, internet, and digital media names as a group. They can also make businesses a bit slower to approve new tech spending, so the pressure is not just on prices but on demand too.
Higher mortgage rates make it harder for buyers to qualify for a new home. That can slow sales and push Hovnanian to lean on incentives, which squeezes profit.
