US stock futures experienced a significant decline on Monday, retreating from record highs amid escalating concerns surrounding the independence of the Federal Reserve. This sell-off followed reports that US prosecutors had initiated a criminal investigation into Fed Chair Jerome Powell. Dow Jones Industrial Average futures fell by 0.7%, while S&P 500 futures dropped by 0.6%. The tech-heavy Nasdaq 100 futures saw the steepest decline, decreasing by approximately 0.9%, reflecting a sharp turn from all-time closing highs for Wall Street stocks.
The market reacted negatively after Powell disclosed that the Justice Department had issued subpoenas to the Federal Reserve, related to his testimony concerning renovations at the Fed’s headquarters. In a forceful statement, Powell described the investigation as part of an ongoing effort by President Trump to exert pressure on the Fed to reduce interest rates. He expressed that the risk of criminal charges emanated from the Fed’s commitment to setting interest rates based on public interest rather than presidential preference, dismissing the concerns raised in the subpoenas as pretexts.
The confrontation between Powell and the Trump administration has intensified, raising alarms about potential political interference in monetary policy—a factor that has already driven gold prices to record levels and weakened the dollar, which fell to its lowest value in three weeks.
As uncertainty loomed over the Fed’s autonomy, investors were also bracing for forthcoming inflation data set to be released later in the week, including consumer inflation readings expected on Tuesday. With labor market indicators hinting at continued cooling but not indicating a sharp economic downturn, markets largely anticipated no forthcoming interest rate cuts from the Fed this month.
On a broader geopolitical front, Wall Street was closely monitoring developments in Iran, where rising public unrest could be steering the nation toward a state of revolution. President Trump indicated that the US was “looking” at military options in response to the Iranian government’s crackdown on protesters. This situation contributed to fluctuations in oil prices as investors assessed its potential implications for crude supply.
The US government has also intensified its posture toward Cuba regarding Venezuelan oil shipments, while Trump recently revisited the controversial notion of seeking control over the Danish territory of Greenland, stating that the US could pursue such ambitions regardless of local sentiment.
In corporate news, bank and financial services stocks plummeted in response to Trump’s warning aimed at credit card companies. He claimed that lenders could face legal violations if they did not impose a 10% cap on interest rates for one year. Following this announcement, shares of Capital One saw a notable decline of 10%, leading premarket losses, with Citigroup and JPMorgan also experiencing drops as the financial sector braced for the upcoming earnings season.
Significant economic updates are scheduled for the week ahead, including a batch of consumer price data due on Tuesday and producer prices and retail sales on Wednesday. The results from major banks, including JPMorgan Chase, BNY Mellon, Bank of America, Wells Fargo, and Citigroup, will set the tone for the earnings season. Analysts predict that these institutions will report strong performance, marking a record year for the banking industry.
In premarket activity, Walmart saw a surge of 3% after announcing plans to enhance its drone delivery service, while Affirm Holdings experienced a 4% increase following favorable coverage from Citi analysts. Conversely, American Airlines stocks fell by 3% after Barclays analysts maintained a ‘Hold’ rating with a price target of $16.
Additionally, Sun Country Airlines stock soared by 17% after Allegiant Travel announced its intention to acquire the budget airline in a deal valued at around $1.5 billion. However, Capital One and American Express shares were both down due to Trump’s pressure on credit card interest rates.
The dollar experienced its most significant drop in nearly three weeks amidst the fallout from the subpoenas to the Fed, raising apprehensions about the institution’s independence. Analysts have highlighted that the inquiry could threaten the Fed’s credibility, thus stirring speculation about future monetary policy adjustments.
As the week unfolds, attention will remain keenly focused on how these developments will influence investor sentiment and market dynamics.
