Wall Street Declines as Federal Reserve Chair Powell Faces Justice Department Probe
US markets declined Monday after Fed Chair Jerome Powell received Justice Department subpoenas regarding $2.5 billion headquarters renovation testimony. Dow Jones fell 400 points early, while gold hit record $4,600 per ounce. The probe has raised concerns about Fed independence, prompting investors to move away from US assets. The dollar weakened 0.24% as analysts described the situation as putting Fed independence into "uncharted waters."
*this image is generated using AI for illustrative purposes only.
US stock markets opened on a volatile note Monday as investors reacted to news that Federal Reserve Chair Jerome Powell received subpoenas from the Justice Department. The development has raised concerns about central bank independence and prompted what analysts describe as a "Sell America" trade, where investors simultaneously offload US stocks, bonds, and dollars.
Market Performance Shows Broad Decline
The major US indices opened significantly lower, with the Dow Jones Industrial Average experiencing the steepest decline. Market performance in early trading showed widespread investor concern:
| Index | Opening Level | Change (Points) | Change (%) |
|---|---|---|---|
| Dow Jones | 49,011.31 | -492.76 | -1.00% |
| S&P 500 | 6,934.07 | -32.21 | -0.47% |
| Nasdaq Composite | 23,562.97 | -108.37 | -0.46% |
By 12:32 p.m. EST, the Dow Jones continued trading in negative territory at 49,416.36, down 0.18%. The S&P 500 and Nasdaq managed to pare losses and traded higher later in the session.
Justice Department Probe Details
The Justice Department served Powell subpoenas on Sunday evening regarding his congressional testimony about ongoing renovations at the Federal Reserve's headquarters. The renovation project carries a total cost of $2.5 billion. Powell has described the Justice Department's action as an escalation in administration pressure aimed at influencing the central bank.
The Fed Chair has been in disagreement with the Trump administration over interest rate policy, as the Federal Reserve has maintained a measured approach to rate reductions despite calls for accelerated cuts. Previous administration efforts included attempts to remove Fed Governor Lisa Cook and repeated demands for sharp interest rate reductions.
Currency and Commodities React
The US dollar weakened against global currencies, trading 0.24% lower as of 12:42 p.m. EST. Treasury bonds also declined as investors expressed concerns about the Federal Reserve's independence. Ian Lyngen, head of US rates strategy at BMO Capital Markets, noted that characterizing these events as putting Fed independence into "uncharted waters would be an understatement."
In contrast to declining traditional assets, gold surged to an all-time high of $4,600 per ounce as investors sought safe-haven investments. David Chao, global market strategist at Invesco Asset Management, stated that "the Fed subpoena is another example of how US assets are becoming less attractive."
Market Outlook and Analysis
Analysts suggest the current market reaction reflects broader concerns about institutional independence and economic governance. The "Sell America" trade pattern previously emerged when the administration imposed significant tariffs on global trade partners. BMO Capital Markets indicated they "remain skewed toward higher yields in the near-term" as market uncertainty continues.
The simultaneous decline in US equities, bonds, and currency demonstrates investor apprehension about potential political interference in monetary policy decisions. Market participants are closely monitoring developments regarding Federal Reserve independence and their potential impact on future economic policy.
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