US Futures Slip, World Shares Mixed as Fed Chair Powell Faces Legal Threat/ Newslooks/ WASHINGTON/ J. Mansour/ Morning Edition/ U.S. futures dropped as Federal Reserve Chair Jerome Powell revealed a legal threat from the DOJ. President Trump denied involvement but continues to pressure the Fed over interest rates. Financial markets reacted sharply, especially banking and oil sectors.
Fed Legal Threat and Market Impact: Quick Looks
- U.S. stock futures fell amid legal scrutiny of Fed Chair Jerome Powell
- DOJ issued subpoenas regarding Fed building renovations, sparking political tension
- President Trump denied coordinating the investigation but criticized Powell’s actions
- Banking and credit card stocks tumbled after Trump suggested a cap on interest rates
- ExxonMobil shares slipped following Trump’s remarks on Venezuela operations
- Asian markets gained while European markets were mostly flat or mixed
- Upcoming U.S. economic data includes inflation, wholesale prices, and retail sales
- Commodities like gold, silver, and copper rose; oil prices edged lower
US Futures Slip, World Shares Mixed as Fed Chair Powell Faces Legal Threat
Deep Look
U.S. stock futures dipped early Monday following shocking news that Federal Reserve Chair Jerome Powell has been served subpoenas from the Department of Justice and potentially faces criminal charges. The investigation stems from Powell’s testimony about a $2.5 billion renovation project involving two Federal Reserve buildings—a project that has come under fire from President Donald Trump.
The futures for major U.S. indexes responded swiftly. The S&P 500 was down 0.5%, while the Dow Jones Industrial Average fell 0.7%. Nasdaq futures led the decline, falling 0.8%.
The legal challenge marks a major escalation in Trump’s long-standing feud with the Federal Reserve and Powell, whom he appointed in 2017. Trump has continually criticized the Fed for not slashing interest rates aggressively. This latest episode threatens to further destabilize financial markets and sow doubt over the independence of the central bank.
In a strongly worded video message, Powell defended the Fed’s integrity and labeled the legal action a “pretext” aimed at undermining the institution’s autonomy in determining monetary policy.
President Trump, speaking briefly to NBC News on Sunday, denied knowledge of the DOJ investigation into Powell. When asked if the probe was politically motivated to influence rate policy, he responded, “No. I wouldn’t even think of doing it that way.”
With Powell’s term ending in May, there is mounting speculation that Trump could announce a new Fed chair nomination by the end of January. The administration has also reportedly looked into removing Fed Governor Lisa Cook, further stoking fears of a politicized central bank.
Investors and analysts are particularly concerned about the implications of weakening Fed independence. Subpoenas tied to Powell’s role and the broader perception of political interference could reduce confidence in U.S. financial systems, including the appeal of Treasury securities for global investors.
Yields on both 2-year and 10-year U.S. Treasury notes inched up slightly after Powell’s remarks, indicating rising concerns among bondholders.
Financial stocks, especially in the banking and credit card sectors, took a hit in premarket trading. Trump proposed a 10% cap on credit card interest rates for a one-year period, potentially starting January 20. The announcement sent shockwaves through Wall Street, as many institutions heavily contributed to Trump’s 2024 campaign.
Capital One and Synchrony saw their stocks fall over 8% each. Visa and Mastercard declined around 2%, while large banks such as Wells Fargo, JPMorgan, Bank of America, and Citigroup reported losses ranging from 2% to 4%. These same institutions are also set to release quarterly earnings later this week.
On the energy front, ExxonMobil shares dipped slightly after Trump suggested he might block the company from expanding into Venezuela. This followed negative remarks by Exxon’s CEO about the feasibility of investing in Venezuela after the fall of Nicolás Maduro. In contrast, Chevron and ConocoPhillips enjoyed modest gains.
Investors are also watching closely for upcoming economic indicators. Consumer price inflation data will be released Tuesday, followed by wholesale price reports Wednesday. Other key figures include retail sales and housing data, which may shape future interest rate expectations.
Globally, market sentiment was mixed. In Europe, France’s CAC 40 dipped 0.1%, the U.K.’s FTSE 100 edged up by the same margin, and Germany’s DAX gained 0.5%.
In Asia, Hong Kong’s Hang Seng jumped 1.4% and the Shanghai Composite rose 1.1%, fueled by optimism that Chinese authorities are preparing additional stimulus. South Korea’s Kospi climbed 0.8%, and Australia’s ASX 200 was up 0.5%. Markets in Tokyo were closed for a holiday.
On the commodities side, oil prices slipped slightly. U.S. crude lost 20 cents to settle at $58.91 per barrel, while Brent crude dropped 17 cents to $63.17. Precious metals surged, with gold up 2.2%, silver rising 6%, and copper gaining 1.4%.
As tensions between the Fed and the White House deepen, investors remain cautious amid signs of political interference in economic policy and uncertainty over leadership changes at the central bank.
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