Wall Street Jolted by Trump-Fed Fight Before CPI

Alicia Levine, Head of Investment Strategy at BNY Wealth, talks about why growth inflation and yield trends support equities.

Wall Street kicked off the week on a cautious note, with stocks, bonds and the dollar edging lower as traders rushed to the safety of precious metals after the Trump administration escalated its attack on the Federal Reserve, raising concern about central bank independence.

While moves were largely contained to be considered a selloff of American assets, they underscored unease over political interference in monetary policy. The S&P 500 halted a rally that put the gauge on the brink of 7,000. Capital One Financial Corp., American Express Co. and JPMorgan Chase & Co. sank as President Donald Trump called on credit-card companies to cap interest rates at 10% for a year.

Longer-dated Treasuries underperformed, with 30-year yields set for their biggest advance this year. Those on two-year notes were little changed. The dollar fell against most of its major peers.

The Fed’s perceived independence from government whims is a bedrock assumption of US markets, and any change to that perception could weigh on sentiment. While Fed independence risks will likely be a key theme throughout 2026, Krishna Guha at Evercore says he’s alive to the possibility the market may not deliver a “full-blown riot.”

“Investors have learned to live with Trump bullying the Fed, Powell has only four months left as Fed chair, there is no immediate threat of removal, and Powell has pledged to continue as before,” Guha said.

Jerome Powell said the central bank had been served grand jury subpoenas from the Justice Department threatening a criminal indictment. In a forceful written and video statement released Sunday evening, Powell said the action was related to his June congressional testimony on ongoing renovations of the Fed’s headquarters.

In an interview with NBC News on Sunday, Trump denied having any knowledge of the investigation into the central bank.

The S&P 500 fell to around 6,960. The KBW Bank Index lost 1.4%. The yield on 10-year Treasuries rose two basis points to 4.19%. A dollar gauge slid 0.3%.

Stocks, bonds and the dollar bounced from session lows, but caution prevailed after the Trump administration escalated its attack on the Federal Reserve, raising concern about central bank independence. Gold hit fresh highs.

While moves in US assets were contained, they underscored unease over political interference in monetary policy. The S&P 500 wavered after a rally that put the gauge close to 7,000. Capital One Financial Corp., American Express Co. and JPMorgan Chase & Co. sank as President Donald Trump called on credit-card companies to cap rates at 10% for a year. Alphabet Inc. hovered near $4 trillion.

Jerome Powell.

Longer-dated Treasuries underperformed, with 30-year yields set for their biggest advance this year. Those on two-year notes were little changed. The dollar fell against most of its major peers.

The Fed’s perceived independence from government whims is a bedrock assumption of US markets, and any change to that perception could weigh on sentiment. While independence risks will likely be a key theme throughout 2026, Krishna Guha at Evercore says he’s alive to the possibility the market may not deliver a “full-blown riot.”

“Investors have learned to live with Trump bullying the Fed, Powell has only four months left as Fed chair, there is no immediate threat of removal, and Powell has pledged to continue as before,” Guha said.

The defining feature of this market is how little the market seems to care about an increasingly noisy backdrop including geopolitics, policy risk, and macro uncertainty, according to Mark Hackett at Nationwide.

“Investors should use this period of low volatility to reassess portfolio balance and ensure exposure reflects the market’s broadening leadership,” he said.

The S&P 500 held near 6,970. The KBW Bank Index lost 1.4%. Most megacaps gained, with Tesla Inc. leading the charge. Alphabet Inc.’s Google confirmed that it has entered a multiyear deal with Apple Inc. to power the iPhone maker’s artificial-intelligence technology.

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