Stock Futures Fall as Criminal Probe into Fed Chair Powell Rattles Markets
U.S. stock futures declined sharply after the Department of Justice opened a criminal investigation into Federal Reserve Chair Jerome Powell, marking a significant escalation in President Donald Trump's efforts to pressure the central bank. Futures on the Dow Jones Industrial Average fell 199 points, while S&P 500 and Nasdaq-100 futures dropped 0.5% and 0.7%, respectively, as investors reacted to the heightened threat to the Fed's independence.
Powell confirmed the investigation in a rare video statement Sunday evening, linking it to his past congressional testimony regarding Fed office renovations. He framed the probe as a political tactic aimed at influencing monetary policy ahead of the end of his term in May. "This is about whether the Fed will be able to continue to set interest rates based on evidence and economic conditions, or whether instead, monetary policy will be directed by political pressure or intimidation," Powell stated.
Market Reaction: A Flight to Safety and "Sell-America" Trade
The news triggered an immediate risk-off shift. The Cboe Volatility Index (VIX), Wall Street's fear gauge, rose as traders sought protection. Gold futures, viewed as a hedge against institutional instability, jumped 2%. Analysts warned of a broader "sell-America" trade, where global investors could apply a higher risk premium to U.S. assets. "It's not about Powell at this point, it's about the independence of the Fed," said Jay Woods of Freedom Capital Markets, noting the market's reflexive sell-off.
The confrontation arrives at a delicate juncture. The stock market is trading at record highs following a strong weekly performance, but the Fed is expected to pause its rate-cutting cycle later this month. Trump has publicly advocated for lower rates and recently proposed a controversial one-year cap on credit card interest rates at 10%, a move critics argue could restrict lending and hurt bank profitability—adding another layer of uncertainty for financial stocks.
Earnings Season Looms Amid Unprecedented Uncertainty
The political storm coincides with the start of earnings season, with major banks including JPMorgan Chase, Bank of America, and Goldman Sachs set to report quarterly results. Their commentary will be scrutinized not only for insights into consumer health and capital markets but also for any assessment of how the escalating conflict between the White House and the Fed might impact the financial system and economic outlook. The probe introduces unprecedented uncertainty into the core of U.S. monetary policy, threatening to undermine a key pillar of market stability.
