US STOCKS-Wall St drops on fresh Fed pressure; banks hit by rate-cap proposal

Updates with morning prices, analyst comments

By Medha Singh and Pranav Kashyap

Jan 12 (Reuters) - U.S. stocks slid on Monday after the Trump administration renewed its broadsides against the Federal Reserve, reigniting concerns over the central bank's independence, while a proposed one-year cap on credit-card interest rates dragged on financial stocks.

The administration threatened to indict Fed Chair Jerome Powell over his Congressional testimony on a renovation project, a move Powell called a "pretext" to gain more influence over interest rates that President Donald Trump has pressed to cut sharply since taking office in January 2025.

"It's another dent to the armor of the perceived and preferred independence between the Fed and the White House. Any further meaningful moves towards less independence is not going to be viewed favorably by markets," said Jordan Rizzuto, CIO at GammaRoad Capital Partners.

Wall Street's fear gauge, the Cboe Volatility index .VIX, touched its highest since December 18, while safe-haven gold hit a record high for the first time this year. GOL/

U.S.-listed shares of Harmony Gold HMY.N rose 8.8%, while Barrick Mining B.N and Kinross Gold KGC.N gained nearly 4% each.

Investors also turned cautious over stretched valuations as big banks kick off the fourth‑quarter earnings season this week, led by JPMorgan Chase JPM.N on Tuesday.

At 9:36 a.m. ET, the Dow Jones Industrial Average .DJI fell 428.06 points, or 0.86%, to 49,076.01, the S&P 500 .SPX lost 16.60 points, or 0.24%, to 6,949.68 and the Nasdaq Composite .IXIC gained 0.58 points, or 0.00%, to 23,671.93.

Rizzuto added that upcoming bank earnings should offer an early snapshot of consumer borrowing and lenders' loan, along with a clue to whether investors need to start worrying about rising credit strain and credit risk.

CREDIT-CARD RATE CAP

Shares of lenders and credit card firms slid after Trump called for a one-year cap on credit card interest rates at 10% starting on January 20.

Citigroup C.N tumbled 3%, while JPMorgan Chase JPM.N fell 1.2%.

Credit-card lender American Express AXP.N shed 4%, while consumer finance firms such as Synchrony Financial SYF.N, Bread Financial BFH.N and Capital One COF.N slumped between 6% and 10%.

The broader financial sector .SPSY fell 1.1%, while consumer staples .SPLRCS rose 0.5%.

JPMorgan, Barclays and Goldman Sachs joined Morgan Stanley in pushing back their calls for U.S. rate cuts after Friday's data suggested the labor market isn't deteriorating as quickly as feared.

Markets are still betting on at least two more quarter-point cuts before year-end, according to LSEG data. The focus now shifts to Tuesday's U.S. CPI report.

Among other corporate news, Walmart WMT.O rose 1.8% as the retailer, which shifted its listing to the Nasdaq from the NYSE last month, was set to join the Nasdaq-100 index .NDX on January 20.

UnitedHealth Group UNH.N fell 2.2% after the Wall Street Journal, citing a U.S. Senate committee investigation, reported that the insurer used aggressive tactics to collect diagnoses that can increase Medicare Advantage payouts.

Trump said he might block Exxon Mobil XOM.N from investing in Venezuela following CEO Darren Woods' comments that the South American country is "uninvestable." The U.S. energy major's shares dropped 1%.

Declining issues outnumbered advancers by a 1.87-to-1 ratio on the NYSE and by a 1.76-to-1 ratio on the Nasdaq.

The S&P 500 posted 16 new 52-week highs and two new lows, while the Nasdaq Composite recorded 37 new highs and 28 new lows.

(Reporting by Medha Singh and Pranav Kashyap in Bengaluru; Editing by Maju Samuel)

((Medha.Singh@thomsonreuters.com; +91 80 6210 0592; X, formerly Twitter: @medhasinghs;))