Stocks Climb as Trump Denies Plan to Fire Powell: Markets Wrap

(Bloomberg) — Speculation about the fate of Federal Reserve Chair Jerome Powell set off a short-lived tempest in financial markets Wednesday, with volatility mostly quelled after President Donald Trump said he has no plans to fire the central bank chief and was only discussing it in “concept.”

The S&P 500 bounced as Trump said he is “not planning on doing anything” to remove Powell, after a White House official said the president was likely to seek the Fed Chair’s ouster soon. Treasury two-year yields, which are more sensitive to imminent Fed moves, slid five basis points to 3.89%. The dollar halted a four-day advance. Softer-than-estimated inflation data also helped fuel the moves on Wednesday, reinforcing bets on Fed rate cuts in 2025.

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Anyone hoping to discern from today’s market action how investors would treat Powell’s firing had a litany of moving parts to consider. While the initial reaction was relatively modest, traders may have simply cast the episode as the latest political theater.

Framed as rhetorical pressure rather than an imminent rupture in Fed leadership, the trading action may therefore provide a poor proxy for how Wall Street would react if Trump actually removed Powell — a prospect that strategists warn would rattle global markets.

“After the president’s subsequent backing off on remarks to remove Powell, the immediate crisis may have passed, though we doubt we are entirely done with this saga,” said Michael Feroli at JPMorgan Chase & Co.

Top bosses at some of Wall Street’s biggest banks emphasized the importance of an independent Fed.

Bank of America Corp.’s Chief Executive Officer Brian Moynihan and Goldman Sachs Group Inc.’s David Solomon joined JPMorgan’s CEO Jamie Dimon in stressing how critical the Fed’s autonomy is. Moynihan said in an interview with Bloomberg TV on Wednesday that the Fed was “set up to be independent.”

To Chris Zaccarelli at Northlight Asset Management, a decision to fire the Fed chief would negatively impact markets as concerns around central bank independence would be at “the forefront of investors’ minds.”

The president’s remarks in the Oval Office left open the possibility of ousting Powell for cause. Trump and his allies have lambasted the Fed chair over the central bank’s decision to hold rates steady and the cost of the central bank’s renovations of its Washington headquarters.

“The decision to fire Powell would have to make its way through the courts because he can only be fired for cause, and they have to determine if the cost overruns on the new Fed building are grounds for that,” he added.

Read: What Firing Powell Would Cost the US Economy

To Dominic Pappalardo at Morningstar Wealth, the biggest outcome of the public criticism from Trump of Powell and ongoing threats of removing him is the possibility of erosion of the Fed’s credibility.

“Markets are unlikely to look kindly on attempts to forcibly remove Chair Powell from office and threaten Fed independence,” said TD Securities strategists including Oscar Munoz and Gennadiy Goldberg. They view such an action as a low-probability, but high-impact event. 

“We would expect markets to price in higher long-run inflation, higher term premium, more near-term Fed rate cuts (and hence lower front-end rates), increased market volatility, and a steeper yield curve,” they added.

Trump has repeatedly assailed Powell as the Fed has held off on cutting rates amid concern that tariffs may spur inflation. Treasury Secretary Scott Bessent on Tuesday suggested Powell should step down from the central bank’s board when his term as chair is up in May 2026.

The Fed’s continued independence is “absolutely critical,” Dimon at JPMorgan said on a conference call Tuesday. That just doesn’t mean under Powell, whom Dimon said he respects, but also for whomever eventually succeeds him. 

Meddling with the Fed “can often have adverse consequences,” Dimon noted.

A Trump’s dismissal of Powell would be an underpriced risk that could trigger a selloff in the dollar and Treasuries, Deutsche Bank AG’s George Saravelos recently said.

If Trump were to force Powell out, the subsequent 24 hours would probably see a drop of at least 3% to 4% in the trade-weighted dollar, as well as a 30 to 40 basis point fixed-income selloff, he said.

“Investors would likely interpret such an event as a direct affront to Fed independence, putting the central bank under extreme institutional duress,” Saravelos said.

Meantime, US economic activity “increased slightly” between late May and early July, the Fed said in its Beige Book survey of regional business contacts. The report also said that “uncertainty remained elevated, contributing to ongoing caution by businesses.”

Earlier Wednesday, data showed the producer price index was unchanged from a month earlier, after an upwardly revised 0.3% gain in May. US wholesale prices rose 2.3% from a year earlier, the least since September.

“Disinflation remains, but the Fed will be undeterred in keeping rates steady until September,” said Jamie Cox at Harris Financial Group. “As long as the labor market remains strong and resilient, rates aren’t likely to move meaningfully lower.”

Corporate Highlights:

• United Airlines Holdings Inc. refined its profit outlook for this year after travel rebounded from flight disruptions, trade tensions and fighting in the Middle East conflict.
• Goldman Sachs Group Inc.’s stock traders posted the largest revenue haul in Wall Street history, as volatility sparked by the Trump administration’s trade war spurred a second straight record quarter for the unit.
• Morgan Stanley’s stock traders scored their best second quarter on record as the biggest US banks continue to reap the benefits of market volatility tied to President Trump’s policy moves.
• Bank of America Corp.’s traders posted a record second quarter as the company reaped the benefits of volatile markets and net interest income topped analysts’ estimates.
• PNC Financial Services Group beat expectations for second-quarter net interest income, helped by an increase in loan growth.
• ASML Holding NV Chief Executive Officer Christophe Fouquet walked back his forecast that sales will grow next year, blaming trade disputes and global tensions.
• Tesla Inc. is preparing to launch a longer, six-seat version of its Model Y sport utility vehicle in China, where the carmaker has been losing ground to domestic manufacturers with fresher lineups.
• Elon Musk’s artificial intelligence startup, xAI, is in discussions to lease data center capacity in Saudi Arabia, according to people familiar with the matter, part of an effort to expand its infrastructure in regions offering cheap energy and political goodwill.
• Nvidia Corp. boss Jensen Huang anticipates getting the first batch of US licenses to export H20 AI chips to China soon, formally allowing the company to resume sales of a much sought-after component to the world’s top semiconductor arena.
• Alphabet Inc.’s Google will debut new Pixel-branded hardware at an event on Aug. 20 in New York, with the lineup expected to include several smartphones and a smartwatch, all powered by the company’s artificial intelligence technology.
• Hewlett Packard Enterprise Co. is creating a new strategy committee and agreed to work with Elliott Investment Management on ways to help the software company boost value.
• Johnson & Johnson beat Wall Street’s quarterly sales expectations and raised its full-year outlook, a show of confidence as the pharmaceutical industry faces the dual threats of tariffs and a crackdown on drug pricing.

Some of the main moves in markets:

Stocks

• The S&P 500 rose 0.3% as of 4 p.m. New York time
• The Nasdaq 100 rose 0.1%
• The Dow Jones Industrial Average rose 0.5%
• The MSCI World Index rose 0.2%
• Bloomberg Magnificent 7 Total Return Index rose 0.3%
• The Russell 2000 Index rose 1.1%
• Philadelphia Stock Exchange Semiconductor Index fell 0.4%
• KBW Bank Index rose 0.3%

Currencies

• The Bloomberg Dollar Spot Index fell 0.3%
• The euro rose 0.3% to $1.1635
• The British pound rose 0.2% to $1.3416
• The Japanese yen rose 0.7% to 147.87 per dollar

Cryptocurrencies

• Bitcoin rose 2.4% to $119,181.06
• Ether rose 11% to $3,378.09

Bonds

• The yield on 10-year Treasuries declined three basis points to 4.45%
• Germany’s 10-year yield declined two basis points to 2.69%
• Britain’s 10-year yield advanced one basis point to 4.64%
• The yield on 2-year Treasuries declined five basis points to 3.89%
• The yield on 30-year Treasuries declined one basis point to 5.01%

Commodities

• West Texas Intermediate crude rose 0.3% to $66.71 a barrel
• Spot gold rose 0.7% to $3,347.94 an ounce

–With assistance from Denitsa Tsekova and Isabelle Lee.

©2025 Bloomberg L.P.