Fed Chair Fate Worried Wall Street – US Market Wrap

Speculation about the fate of Federal Reserve Chair Jerome Powell sparked a brief storm in financial markets Wednesday, but volatility was mostly subdued after Trump said he has no plans to fire the central bank chief and is only discussing it in “concept.”

The S&P 500 rose after Trump said he is “not planning on doing anything” to remove Powell, despite a White House official saying the president was likely to seek the Fed Chair’s removal soon. Treasury two-year yields, which are more sensitive to upcoming Fed moves, fell five basis points to 3.89%. The dollar reversed a four-day rally. Softer-than-expected inflation data also fueled Wednesday’s moves, supporting bets on Fed rate cuts in 2025.

Anyone attempting to predict how investors will react to Powell’s firing based on today’s market action must consider a slew of variables. While the initial reaction was muted, traders may have dismissed the episode as the latest political theater.

The trading action may be a poor proxy for how Wall Street would react if Trump removed Powell, which strategists warn would rattle global markets.

The president’s remarks in the Oval Office left open the possibility of Powell’s removal for cause. Trump and his allies have chastised the Fed chair for the central bank’s decision to keep interest rates unchanged, as well as the cost of renovating the central bank’s Washington headquarters.