US stocks experienced fluctuations on Monday, retreating from record highs due to apprehensions regarding the Federal Reserve’s independence after officials initiated a criminal investigation involving Chair Jerome Powell.
The Dow Jones Industrial Average (^DJI) dropped below the neutral line, while the S&P 500 (^GSPC) showed a slight increase. The tech-heavy Nasdaq Composite (^IXIC) rose by 0.2%, following a series of all-time closing highs for Wall Street. The three indices opened the day lower but trimmed their losses during late morning trading.
Concerned investors are withdrawing from US markets after Powell disclosed that the Justice Department has subpoenaed the Fed, indicating possible criminal charges related to his remarks on renovation projects. In a strong statement, Powell characterized this action as an escalation in President Trump’s effort to pressure the Fed into lowering interest rates.
Powell expressed, “The potential for criminal charges arises from the Federal Reserve making interest rate decisions based on our best judgment to serve the public, as opposed to adhering to the President’s preferences,” labeling the allegations noted in the subpoenas as “pretexts.”
The DOJ’s actions, combined with Powell’s prompt reaction, fuel anxiety over political interference in monetary policy, which has already led to a surge in gold (GC=F) reaching record highs and the dollar (DX-Y.NYB) hitting its lowest mark in three weeks.
In the corporate sector, bank and financial services stocks faced declines after Trump issued a warning to credit card issuers, claiming they would be “violating the law” without a cap on interest rates at 10%. Capital One’s shares (COF) fell 7%, leading early trading losses. Citi (C) and JPMorgan (JPM) also witnessed downturns.
