Wall Street stocks, dollar sink as Trump demands rate cuts ‘NOW’, attacks Powell
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The news: Wall Street stocks and the dollar fell sharply after President Donald Trump intensified attacks on Federal Reserve Chair Jerome Powell, demanding immediate interest rate cuts and calling him a “major looser”.
The numbers: The Dow industrials fell as much as 1,120 points or 2.86%, with the S&P500 down as much as -2.99% and the Nasdaq falling 3.31%. Tesla shares fell as much as 7.43%, while Nvidia and Apple also declined.
All 11 S&P 500 sectors were lower. The ICE US Dollar Index fell more than 1% to its lowest level in three years, and gold surged to over USD3,400 a troy ounce, a new record.
Yields on longer-term Treasurys rose, with the 10-year up to 4.38%, from 4.33%.
Futures markets are now pricing about 90 basis points of Fed rate cuts in 2025, according to LSEG data.
What they said: On Friday, when markets were closed, White House economic adviser Kevin Hassett said the administration was studying Powell’s removal.
In a social media post Monday, Trump called Powell “Mr Too Late” and a “major loser”, and said the Fed should lower interest rates “NOW”. He said there was “virtually” no inflation and called for “preemptive cuts”.
“Our view remains that the president lacks the power to remove Powell as monetary policy is a legislative function rather than an executive branch function,” TD Cowen’s Washington analyst, Jaret Seiberg, wrote in a note. “That differs from other independent agencies. That said, we do not see legal questions stopping Trump if he is determined to act.”
Analysts like Thierry Wizman, a rate strategist at Macquarie said the “flight from the dollar” on Monday (Tuesday AEST) was being driven by the questions over the Fed’s independence and by a lack of progress on trade deals.
Analysts at CICC, the Chinese investment bank, warned that US policy uncertainty was leading the dollar and Treasuries to “behave more like risk assets”.
The sources: Bloomberg, The Wall Street Journal, Financial Times
