(Reuters) -Wall Street stocks skidded on Monday after U.S. President Donald Trump doubled down on attacks against Federal Reserve Chair Jerome Powell, amplifying concerns about the central bank's autonomy and rattling markets.
Trump repeated his criticism of Powell, saying in a Truth Social post that the economy could slow down unless interest rates are lowered immediately. That followed comments by White House economic adviser Kevin Hassett on Friday that Trump and his team would study if firing Powell was an option.
Trump's continued criticism of the Fed chair has heightened worries about the central bank's ability to independently formulate monetary policy in the world's largest economy, undermining investor confidence in U.S. assets already diminished by Trump's tariffs.
MARKETS:
The S&P 500 closed down 2.36%, after steadying along with the other indexes from losses steeper than 3%, in markets thinned by the absence of numerous overseas markets that remained closed for Easter. The Nasdaq Composite fell 2.55% and the Dow Jones Industrial index fell 2.48%. The U.S. dollar index was down 0.41% and selling of the 10-year Treasury note pushed its yield up 8.2 basis points to 4.4087%.
COMMENTS:
CHRISTIAN SALOMONE, CHIEF INVESTMENT OFFICER, BALLAST ROCK PRIVATE WEALTH, CHARLESTON, SOUTH CAROLINA
“The market is saying that it doesn’t necessarily need lower interest rates, but that it does need stability and certainty regarding economic and political policies. What we have now, with on again/off again tariffs, is extremely counterproductive. The market also is coming to the realization that negotiating with 90 countries in 90 days is just rhetoric; typically it takes 18 months or more to hammer out this kind of multidimensional trade deal. For now, the market is waiting beside the phone to see if there’s any progress made on trade deals and tariffs; if there is, it could snap back. If not, if the signals are that talks aren’t bearing fruit, well, that’s not going to be good.”
RAFIA HASAN, CHIEF INVESTMENT OFFICER, PERIGON WEALTH MANAGEMENT LLC, CHICAGO
“As long as we’re in the midst of this 90-day pause on tariffs, and there continues to be this uncertainty, this kind of selloff is just what we have to expect. Tariffs is ultimately what will affect earnings, and the market, although to what extent no one knows. And now there is this new element added to it, the president’s criticism about Jerome Powell not cutting rates. It’s not so much about that criticism as the assault on another institution that is unnerving investors.”
STUART KATZ, CHIEF INVESTMENT OFFICER, ROBERTSON STEPHENS, SAN FRANCISCO
“President Trump’s threat to fire Fed Chair Powell adds a new vector of uncertainty to the mix. It’s certainly unhelpful, since it’s hard to calculate a credit spread or earnings multiple to a stream of income when there are tariff threats, threats to remove a Fed chair and as a result, threats to economic growth. Companies, consumers and investors can all adapt to uncertainty, but not when the rules of the playing field are dynamically changing at such a fast pace. We don’t need to return to the world that existed prior to January 2025, just have some stability with policies. Right now, the market is feeling its way through the dark and doesn’t know quite how to behave or react to any news.”
NATE GARRISON, CHIEF INVESTMENT OFFICER, WORLD INVESTMENT ADVISORS, WASHINGTON, IOWA
“The theme of the market for the last several weeks has been uncertainty. As uncertainty increases, the market goes in the other direction and for investors, it’s just easier to take some chips off the table. Then, over the weekend, we got no good news, in the form of profess on tariffs, but we heard more about Trump wanting to fire Powell. He has been such a steady hand at the Fed with a consistent approach to managing policy and reacting to the economy that has provided a lot of comfort, so just the threat of removing him sends a bit of a shudder up peoples’ spines.”
BRIAN NICK, MANAGING DIRECTOR & HEAD OF PORTFOLIO STRATEGY, NEWEDGE WEALTH, STANFORD, CT
“It’s not good when you have inflation, interest rates and the dollar all lower on the same day, over the same week and the same month. That kind of pattern tends to occur in emerging markets; it doesn’t happen in the United States. It’s a sign that people don’t want to hold your currency any more and that even your bonds aren’t appealing.
“This is the first day we’ve had a selloff this big without major tariff news. But I’m actually oddly encouraged by some of what we’re hearing the president say about Powell now. He seems to be pivoting from wanting to fire him, which would be remarkably disruptive, to preparing to blame him for whatever the fallout is from all these policies. Also, while if the president fires Jerome Powell it would be incredibly disruptive and would lead to a further steepening of the yield curve because investors would conclude that a politicized Fed can no longer be trusted to manage inflation, I think Powell could still stay on as a member of the FOMC. Then, too, the FOMC is not a dictatorship: removing Powell wouldn’t change the fact that other members might still vote along the same lines. Someone may have pointed out here to the president that a firing might cause more problems than it solves.”
KRISTIAN KERR, HEAD OF MACRO STRATEGY, LPL FINANCIAL, Charlotte, NORTH CAROLINA (by email)
"The decline can be attributed to a mix of the absence of positive tariff updates over the weekend, Trump's continued comments on Fed independence, and the U.S. being one of the few major markets open on Monday. With trading volume generally light, the lack of liquidity is probably amplifying the sell-off."
DUSTIN REID, CHIEF STRATEGIST, FIXED INCOME, MACKENZIE INVESTMENTS, TORONTO
“The market is feeling extremely fragile right now, with the uncertainty surrounding tariffs as a backdrop. So that’s why you can see the market selling off on news about Fed independence and Powell – and not just the stock market, but across assets, in the bond and the foreign exchange markets as well. Broadly, global investors are moving away from being overweight US assets. We’re definitely looking at making more structural changes to our portfolio than we normally would on these developments, but so far we haven’t done anything more than increase our risk hedges over the last weeks or months.”
ADAM SARHAN, CHIEF EXECUTIVE, 50 PARK INVESTMENTS, NEW YORK
"The latest headline du jour is Trump is unhappy with Powell's performance, and it is creating more uncertainty... in a weak environment.
"If this is a strong bull market and we're going up every single day, it's a different environment.
"If you step back and look at the market, you've been in a downtrend since the end of February. So, you had a big move down, and then over the last 2-1/2 (to) three weeks you moved sideways... The inability to rally illustrates how weak the market is right now. The fact that we're down so much today after a long weekend tells me, ok, investors went into the weekend, they looked at the situation, ad they see more uncertainty, not less uncertainty.
"Clearly investors are spooked, and fear is taking over."
ERIC KUBY, CHIEF INVESTMENT OFFICER, NORTH STAR INVESTMENT MANAGEMENT CORP, CHICAGO
"It's really two major stories pushing the market lower. One is the lack of any trade deals over the weekend. I think that we all go home at night hoping that we wake up in the morning with some announcement of some relief on these tariffs and the trade deals as there are all these negotiations with various important nations. And every day that there are no deals struck to provide any relief, it creates continued anxiety that there aren't going to be any reasonable deals struck and that these policies as currently stated end up being what we have, which is going to be ... destructive for the economy."
"The second issue is Trump's vocal desires that he is expressing to replace Jerome Powell because he won't lower interest rates, combined with Jerome Powell's (comments) last week that they are in no hurry to lower interest rates while they're waiting to see what sort of inflationary impact the tariffs have. So there's this terrible stalemate there and concern that there will be some sort of action taken to replace Powell, which would create a real panic in the dollar."
JACK ABLIN, CHIEF INVESTMENT OFFICER, CRESSET CAPITAL, CHICAGO
“The only new news today that could have triggered this kind of selloff is the fact that investors are worried about Fed independence. If the president puts his own person in, and lowers rates against a backdrop of rising inflation – we’d see a continuation of what we’re experiencing now. Unfortunately, both stocks and the dollar are overvalued, which gives them room to fall more in this environment. The S&P 500, based on my calculations, is still 10 to 15% overdone, above fair market value.”
JAMIE COX MANAGING PARTNER, HARRIS FINANCIAL GROUP, RICHMOND VIRGINIA
"Markets are showing disapproval of a lack of progress on trade negotiations. In the absence of any firm commitments from any countries, markets take the fire first, ask questions later (approach.)“
(Compiled by the Global Finance & Markets Breaking News team)
