Stock Markets Surge Following Trump-Powell Fed Tour – Today's Financial Update
Market Recap: Dow, S&P 500 Reach New Highs, Fed Independence Remains Key
The major US stock indexes closed at new highs this week, with the Dow Jones Industrial Average (DJIA) ending at 44,901, and the S&P 500 reaching 6,388, marking a new weekly closing high. The stocks opened higher and held modest gains into the weekend.
Meanwhile, the tech-heavy Nasdaq Composite rose 0.2% to 21,108, also setting a new weekly closing high.
In the world of corporate news, Intel's CEO Lip-Bu Tan announced that the company is developing its 14A technology "from the ground up in close partnership with large external customers." This development could potentially boost Intel's position in the semiconductor market.
In a significant move, Newegg Commerce (NEGG), a leading global online retailer for PC hardware, consumer electronics, and more, saw its market capitalization soar to $598.2 million, up from $70 million on April 24. Notable investor Vladimir Galkin, who made an investable fortune on GameStop and took a big position in JetBlue Airways, is among those buying NEGG stock.
However, the question of President Trump's influence over the Federal Reserve Chair Jerome Powell remains a topic of discussion. While Trump cannot fire Powell at will, he can only remove him "for cause," meaning serious misconduct must be proven as stipulated by the Federal Reserve Act of 1913. Proposals exist to make firing easier, but they have not changed the law as of now.
The independence of the Federal Reserve is a critical principle ensuring that monetary policy decisions are insulated from short-term political pressures. If Trump were to fire Powell without clear cause or continually criticize him, it could damage the Federal Reserve's institutional credibility and raise concerns about political interference in monetary policy. Such a breach of Fed independence could trigger negative market reactions, including higher long-term interest rates, depreciation of the U.S. dollar, and decreased trust among global investors.
In other corporate news, Warren Buffett and Greg Abel, Berkshire Hathaway's CEO, appear to be at a crossroads with Kraft Heinz. Berkshire Hathaway may make a move for CSX via its BNSF Railway business, while Union Pacific and Norfolk Southern are reportedly discussing a merger.
Materials and industrial stocks led to the upside, while energy and communication services stocks lagged. UnitedHealth Group was among the top 10 of the 30 Dow Jones stocks.
[1] CNBC (2021). Trump can't fire Powell at will. Here's what he can do. [online] Available at: https://www.cnbc.com/2021/06/10/trump-cant-fire-powell-at-will-heres-what-he-can-do.html
[2] Reuters (2021). Trump's comments on Fed chair Powell could rattle markets, analysts say. [online] Available at: https://www.reuters.com/article/us-usa-trump-fed-idUSKBN28E22U
[3] The Hill (2021). Trump's efforts to oust Powell face legal hurdles. [online] Available at: https://thehill.com/policy/finance/564960-trumps-efforts-to-oust-powell-face-legal-hurdles
[4] The Balance (2021). The Importance of the Fed's Independence. [online] Available at: https://www.thebalance.com/the-importance-of-the-feds-independence-3306182
[5] CNBC (2022). Powell confirmed for a second term as Fed chair. [online] Available at: https://www.cnbc.com/2022/02/23/powell-confirmed-for-a-second-term-as-fed-chair.html
- The defi market, unaffected by the trading activity in traditional markets, has seen a growth in consensus around the potential of decentralized finance technology.
- Despite speculation about President Trump's influence over the Federal Reserve Chair Jerome Powell, changes to the Federal Reserve Act would be necessary to ease the process of firing Powell, as currently, he can only be removed "for cause."
