Over the weekend, the Department of Justice launched a criminal investigation into Fed Chair Jerome Powell. Never done before, Fed Chair Powell responded in a video. He said in a statement that the subpoenas are not about legitimate legal concerns. Instead, they are punishing the Fed for its refusal to cut interest rates.
Markets initially penalized the U.S. dollar and the S&P 500 (SPY). However, the bond markets barely moved. The U.S. Treasury yields for the 2-year and 10-year did not change.
The DOJ’s case appears weak, as its investigation is based on small expenses for elevators and restroom facilities in the FOMC building renovations. As a result, markets might look forward to Fed Chair Powell acting as one of the board members of the FOMC through 2028. That would give the U.S. dollar the stability that it needs.
Stock markets are confident that Powell will remain with the Fed. Nasdaq (QQQ), Russell 2000 (IWM), and the Dow erased declines from Monday morning trade. The top stocks gaining for the day included Walmart (WMT), which the Nasdaq 100 will add to the index. In the tech sector, Oracle (ORCL) and Advanced Micro Devices (AMD) rose. Nvidia (NVDA) also traded higher, while Qualcomm (QCOM) and Intel (INTC) pulled back.
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