U.S. stocks moved higher in late trading on Monday, with the S&P 500 index reaching a historic intraday high. The U.S. Department of Justice has launched a criminal investigation into Federal Reserve Chairman Jerome Powell, marking a new and more intense phase in President Trump's campaign to pressure the central bank.
The Dow Jones Industrial Average rose 47.45 points, or 0.10%, to 49,551.52; the Nasdaq Composite climbed 124.08 points, or 0.52%, to 23,795.43; and the S&P 500 gained 16.97 points, or 0.24%, to 6,983.25. During Monday's late session, the S&P 500 climbed as high as 6,983.58, setting a new intraday record. Shares of banks with significant credit card operations, such as Citigroup, JPMorgan Chase, Bank of America, and Capital One, broadly declined. This followed President Trump's statement that financial institutions would be acting unlawfully if they did not comply with his demand to cap credit card interest rates at 10% for one year. Critics express concern that while Trump's plan to lower credit card rate caps aims to reduce consumer burdens, it may backfire. The policy could restrict bank lending, ultimately harming consumers and impairing bank profitability. The criminal investigation into Fed Chairman Powell by the Justice Department signifies a new, more contentious stage in the standoff between Trump and the Federal Reserve. Against this backdrop, investors largely reduced their risk exposure. Early Monday, the Cboe Volatility Index (VIX) moved higher, reflecting increased hedging activity in the options market as news of the Powell investigation emerged. In an unusually direct video statement Sunday evening, the Fed's Powell confirmed that federal prosecutors had opened a criminal investigation into his testimony to the Senate Banking Committee regarding the Fed's office renovation project. Powell characterized the investigation as another attempt by Trump to influence the central bank's monetary policy and stated he would not yield to pressure. His term as Chairman ends in May. "This is about whether the Federal Reserve can continue to set interest rates based on evidence and economic conditions, or whether monetary policy will instead be driven by political pressure or intimidation," Powell said in his statement. "Markets have seen this before, and they don't like it," said Jay Woods, Chief Market Strategist at Freedom Capital Markets. "The issue now isn't Powell personally, but the independence of the Fed itself. So, when news like this breaks, the instinctive reaction is to sell." Throughout 2025, U.S. stocks largely disregarded Trump's pressure on the Fed, as the central bank proceeded with three interest rate cuts amid stabilizing inflation. However, the Fed is widely expected to pause further rate cuts at its upcoming meeting later this month, adopting a wait-and-see approach to observe how inflation and the economy evolve in the new year. Trump has made it clear he wants to see the Fed continue lowering rates. Gold futures, often seen as a hedge against diminished Fed independence, jumped 2%. Investors worry that a politically influenced Fed might hesitate to combat resurgent inflation effectively. "This is clearly risk-off behavior," said Krishna Guha, Head of Global Policy and Central Bank Strategy at Evercore ISI. "We expect the dollar, bonds, and stocks to all decline in Monday's trading, creating a 'short America' trade dynamic similar to the peak of the tariff shocks in April and previous threats to Powell's chairmanship. Global investors are applying a higher risk premium to U.S. assets." "Gold and other safe-haven assets should rise," he added. The battle over central bank independence is occurring as U.S. stocks trade near historic highs. Both the S&P 500 and the Dow closed at record levels on Friday, capping a positive week for the major benchmarks. Traders are preparing for the start of earnings season, with several major Wall Street banks set to report results in the coming days. JPMorgan Chase, Bank of America, Morgan Stanley, and Goldman Sachs are all scheduled to release quarterly earnings, providing investors with fresh insights into consumer spending, M&A activity, and trading revenue.
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