US stocks reached new highs on Monday as Wall Street navigated a cautious atmosphere, primarily brushing aside worries regarding the independence of the Federal Reserve following a criminal investigation launched by US prosecutors into Chair Jerome Powell.
The Dow Jones Industrial Average inched up by 0.2%, closing at a record level. Similarly, the S&P 500 also gained 0.2%, marking its own all-time high. The tech-heavy Nasdaq Composite saw a modest increase of 0.3%. Initially, the three indexes opened the day on a low note, but they managed to reverse their fortunes by late morning.
In tandem with these milestones, other market segments exhibited notable reactions to the Fed’s situation. Gold and silver prices surged to record highs as investors sought safer assets, while bond prices saw a decline. The US dollar also fell during the session.
Market tension intensified as Powell disclosed that the Justice Department had subpoenaed the Fed, potentially instigating criminal charges related to his testimony regarding building renovations. In a decisive statement, Powell characterized this move as an escalation of President Trump’s efforts to pressure the Fed into lowering interest rates. He remarked, “The threat of criminal charges is a consequence of the Federal Reserve setting interest rates based on our best assessment of what will serve the public, rather than following the preferences of the President,” dismissing the concerns outlined in the subpoenas as “pretexts.”
In the corporate sector, shares of banks and financial services dropped significantly following President Trump’s warning directed at credit card issuers. Trump stated that lenders would violate the law if they did not cap interest rates at 10%. Capital One led the decline, with its shares dropping 7%, while Citi and JPMorgan also experienced losses as the week commenced ahead of anticipated earnings reports from prominent US banks.
As investors brace for updates on inflation for December, the Consumer Price Index (CPI) will be released on Tuesday. Following last Friday’s jobs report, which indicated a cooling labor market without hinting at a significant economic slowdown, markets appeared to be largely expecting no rate cuts from the Fed this month.
Despite the legal challenges faced by the Fed and swirling uncertainty, the resilience shown in stock market performance highlights a complex but hopeful economic landscape as investors remain focused on forthcoming economic indicators.