Morning Squawk Newsletter

Happy Friday. President Trump has chosen a nominee for the next chairman of the Federal Reserve, and it’s someone named “Kevin.”

This morning, stock futures are down. The S&P 500 saw a slight loss yesterday.

Here are five key points investors should know as they begin their trading day.

1. Trump Makes the Choice

Former Federal Reserve Board member Kevin Warsh announced today that he will be the next chairman of the US central bank. Trump commented on social media, saying, “I’ve known Kevin for a long time, and I believe he will go down as one of the great Fed Chairs, perhaps one of the best.”

CNBC’s Jeff Cox notes that this nomination is not expected to disrupt the market, as Warsh has a strong background with the central bank and a reputation for political independence. However, Senate confirmation is needed, and that may become tricky due to Republican Sen. Thom Tillis’ promise to block Fed nominations until the investigation into current Chairman Jerome Powell is resolved.

Administration sources indicated that Warsh met with officials at the White House amid talks that he was a frontrunner for the role. Other candidates included Kevin Hassett, the director of the National Economic Council, Christopher Waller, the current Fed director, and Rick Rieder of BlackRock.

2. Software Viruses

Yesterday marked a tough day for the software sector, with the iShares Expanded Technology Software Sector ETF facing its worst performance since April, largely due to struggles from major players like ServiceNow and Microsoft. The sector has officially entered bear market territory as it’s down 22% from its recent highs.

Here’s a quick breakdown:

• Microsoft’s shares dropped 10%, their worst day since 2020, erasing over $350 billion in market value despite beating earnings expectations.
• ServiceNow also fell around 10% even after exceeding revenue estimates, but concerns about AI’s impact on the industry overshadowed its strong showing.
• The IVG is about to experience its biggest monthly loss since 2008, highlighting the drastic shift in an industry that was once favored.
• This downturn affected technology-heavy companies, with the Nasdaq Composite underperforming yesterday.
• Yet, all three major indices are likely to finish the month positively.

3. Not That Fast

President Trump yesterday backed the Senate’s overarching funding agreement, which aims to sustain government operations through the end of the fiscal year. This endorsement could help secure support and prevent a government shutdown scheduled to begin early Saturday.

The revised plan would fund various departments, including Education, Defense, Treasury, State, and Transportation. However, the Department of Homeland Security is notably absent from this funding measure, a compromise following recent incidents. Senate Democratic Leader Chuck Schumer stated that a short-term funding solution for DHS will instead be proposed.

Considering last night’s Senate vote was postponed amid bipartisan opposition, a partial government shutdown still looms as a possibility.

4. I-Bye

Apple’s fiscal fourth-quarter results exceeded Wall Street’s expectations across the board. They reported strong revenue for the iPhone and iPad, but they didn’t quite hit targets for some other products.

Apple CEO Tim Cook told CNBC that there is “tremendous” demand for the iPhone, with sales up 23% compared to last year. However, he noted that better numbers could’ve been possible with more chip availability.

Earlier in the day, Apple confirmed its purchase of Israeli AI startup Q.ai, though the financial details haven’t been disclosed. The startup is reportedly focused on audio-related technology.

5. AI Maison

In other news, there might be a significant investment on the horizon: sources indicated that Amazon is negotiating a potential $50 billion investment in OpenAI.

Talks between OpenAI CEO Sam Altman and Amazon CEO Andy Jassy are ongoing, and details could change as discussions progress. This potential deal is interesting, especially since Amazon has already invested heavily in Anthropic, a leading competitor of OpenAI.

Daily Dividend

This week has been eventful, with a Federal Reserve meeting, funding disputes, and a slew of earnings calls. Here’s a recap of stories you might have missed.