US stock markets opened lower on Monday as investors grappled with renewed concerns over Federal Reserve independence following fresh attacks from the Trump administration on the central bank. The selling pressure was compounded by proposed legislation targeting credit card interest rates, which particularly weighed on financial sector stocks.

Market Performance at Opening

All three major US indices declined at the opening bell, reflecting investor unease over potential interference with monetary policy independence.

Federal Reserve Independence Concerns

The primary driver of market weakness stemmed from renewed attacks by the Trump administration on the Federal Reserve, reigniting longstanding concerns about potential political interference in monetary policy decisions. These developments have historically created uncertainty among investors who value the central bank's independence in making interest rate and policy decisions based on economic fundamentals rather than political pressure.

Financial Sector Under Pressure

Adding to the market's woes, financial stocks faced additional headwinds from proposed legislation that would impose a one-year cap on credit card interest rates. This regulatory proposal specifically targeted the banking and financial services sector, creating sector-specific selling pressure beyond the broader market concerns about Federal Reserve independence.

Market Sentiment and Trading Activity

The Nasdaq Composite experienced the steepest decline among the major indices, falling 0.40% as technology and growth stocks appeared particularly sensitive to the uncertainty surrounding monetary policy independence. The S&P 500 followed with a 0.32% decline, while the Dow Jones Industrial Average showed relative resilience with only a marginal 0.01% drop, reflecting the defensive nature of some of its constituent companies during periods of market uncertainty.

U.S. stock markets surged to fresh record highs on Friday, buoyed by a mixed December jobs report that reinforced stability in the labor market while potentially delaying immediate Federal Reserve interest rate cuts. The rally demonstrated investor confidence despite mixed economic signals.

Market Performance Overview

Major indices posted solid gains across the board, with all three primary benchmarks setting new records:

The Nasdaq composite led the market advance, while the S&P 500 topped its previous all-time high set earlier in the week.

Jobs Report Drives Market Sentiment

The U.S. Labor Department's December employment report delivered mixed signals that investors interpreted positively. While employers hired fewer workers than economists anticipated, the unemployment rate improved beyond expectations. This combination reinforced the concept of a "low-hire, low-fire" labor market that may help the economy avoid recession.

The employment data prompted traders to reduce expectations for immediate Federal Reserve action. The probability of a rate cut at the Fed's upcoming meeting dropped to just 5% from 11% the previous day, according to CME Group data. However, market participants still largely expect at least two rate cuts during the upcoming year.

Sector Leaders and Corporate Developments

Top S&P 500 performers included:

Vistra emerged as a standout performer, soaring 10.5% after announcing a 20-year agreement to supply electricity from three nuclear plants to Meta Platforms. This deal reflects the growing trend of Big Tech companies securing power sources for artificial intelligence data centers. Similarly, Oklo jumped 7.9% following its own nuclear fuel agreement with Meta Platforms for a facility project in Pike County, Ohio.

Housing Sector Rally

Homebuilders and housing-related companies posted strong gains following President Trump's announcement of a plan to reduce mortgage rates through a $200 billion mortgage bond purchase program. The initiative mirrors previous Federal Reserve bond-buying strategies designed to lower borrowing costs.

Housing sector performance:

• Lennar: +8.9%
• D.R. Horton: +7.8%
• PulteGroup: +7.3%
• Builders FirstSource: +12.0%

Notable Decliners

General Motors fell 2.7% after announcing a $6 billion charge for the fourth quarter related to its electric vehicle pullback, adding to the $1.6 billion in charges from the previous quarter. Reduced tax incentives and relaxed fuel-emission regulations have dampened EV demand.

WD-40 tumbled 6.6% following weaker-than-expected quarterly profit results, though management attributed the shortfall to timing issues rather than underlying demand weakness.

Bond Market and Fed Outlook

Treasury yields showed mixed movement, with the 10-year yield easing to 4.16% from 4.19%, while the two-year yield rose to 3.53% from 3.49%. A separate University of Michigan consumer sentiment report suggested strengthening confidence, particularly among lower-income households, with inflation expectations potentially reaching their lowest level in a year.

The combination of stable employment conditions and moderating inflation expectations may provide the Federal Reserve with flexibility for future rate adjustments, though timing remains uncertain given mixed economic signals.