2026-01-12 14:41:00
- S&P 500 down -0.43%
- Nasdaq down -0.39%
- Dow Jones down -0.62%
- Russell down -0.56%
The US Department of Justice subpoenaed the Federal Reserve in an unprecedented move that escalated the ongoing conflict between the White House and the Federal Reserve.
The DOJ is trying to find whether Powell made misleading or false statements to the Senate Banking Committee regarding the scale and costs of the Fed headquarters renovation project.
This is of course just a political pretext to intimidate Fed Chair Powell given his resistance to lower interest rates quickly. This is the same thing that happened to Fed Governor Cook last year when Trump tried to fire her for cause without success as we continue to await the US Supreme Court decision on that case.
Given the strong hurdles to fire the Fed Chair or Fed Governors, this is still likely to be a short-lived episode for the market. Nonetheless, the uncertainty will still remain and traders will keep their focus on a potential indictment and the Fed’s Cook case hearing on January 21.
Tomorrow, the focus will turn to the US CPI report. Last month, we got a big downside surprise that triggered a rally in the stock market as lower inflation would give the Fed more conviction to keep cutting interest rates. The data was taken with a pinch of salt though given the shutdown related issues.
A hot report could add pressure on the stock market in the short-term on a hawkish repricing, while soft data should give it a boost as it would keep the rate cuts on the table while the economy keeps on strengthening.
This article was written by Giuseppe Dellamotta at investinglive.com.
