U.S. stocks fell at the open of trading due to the investigation of Fed chief Powell

The three major U.S. stock indexes fell after the opening of major trading on Jan. 12.

- The S&P 500 broad market index was down about 0.25%. It then slowed its rate of decline to about 0.1%.

- The blue-chip index Dow Jones Industrial Average was losing 0.85%, then recovered some of its losses and was down 0.5%

- The technology sector index Nasdaq Composite initially fell by about 0.5%, but then also recovered losses and even managed to slightly exceed the closing level of trading on Friday, January 9.

Investors reacted negatively to Federal Reserve Chairman Jerome Powell's announcement that the U.S. Justice Department has opened an investigation against him related to the $2.5 billion renovation of the Fed building in Washington, D.C. Powell said the investigation "should be viewed in the broader context of threats from the administration of U.S. President Donald Trump and continued pressure" to demonstrate influence over the Fed.

Banking stocks also reacted negatively to Trump's idea to impose an annual cap on credit card interest rates - at 10 percent, starting Jan. 20. Analysts suggested that such a decision may be beyond the scope of presidential powers, Reuters wrote.

The investigation into Powell will heighten concerns about the Fed's independence, Goldman Sachs chief economist Ian Hatziez noted in a Reuters account. His words were the first such high-level public reaction from Wall Street on the matter, the agency noted. At the same time, Hatzies expressed confidence that Powell in the rest of his term (his term ends in May) will continue to make decisions solely on the basis of economic data, and not under someone else's influence. More active rate cuts from Powell were demanded by US President Donald Trump. He said he was unaware of the DOJ's actions, but Powell is "not very good at the Fed, and he's not very good at building buildings."

Evercore ISI analysts were "shocked" by the U.S. Justice Department's decision, MarketWatch reports. "We expect the dollar, bonds and stocks to fall in trading on Monday [Jan. 12] due to a 'sell America' trend similar to what happened last April at the peak of duty shock," they wrote.

"The investigation, which the central bank will now face, adds to the mounting political and legal pressure from the executive branch on the independence and credibility of a key pillar of U.S. governance," said Eiko Siewert, executive director for sovereign and public sector at Scope Ratings Europe, as quoted by Bloomberg.

The White House's attack on Fed independence poses a threat to the stock market, at least in the near term, said Andrew Tyler, head of global market research at JP Morgan Securities. "While macro and corporate indicators support a tactically bullish bias, the risk to Fed independence poses a threat and hence we are cautious in the short term," Tyler said(quoted by Bloomberg).

This article was AI-translated and verified by a human editor