Stocks shrug, hit record highs after Trump ups the ante against Jerome Powell and the Fed

By John Towfighi, CNN

New York (CNN) — Investors took one look at the Trump administration’s criminal investigation into Federal Reserve Chair Jerome Powell and decided to resuscitate the “Sell America” trade Sunday night, selling off US stock futures, bonds and the dollar.

But the “Sell America” trade was muted Monday, with US stocks recovering initial losses and closing higher. The Dow gained 86 points, or 0.17%, to close at a record high, recouping losses after falling almost 500 points earlier. The broader S&P 500 rose 0.16% and also closed at a record high. The tech-heavy Nasdaq Composite gained 0.26%.

While stocks rebounded, the US dollar remained under pressure and weakened against other major currencies. The dollar index, which tracks the dollar’s strength against six major currencies, was down 0.22%.

Treasuries fell somewhat, too. The benchmark 10-year yield, which trades in opposite direction to prices, rose to 4.19%, near a one-month high. Bond yields’ move higher suggests the Trump administration’s action against the Fed could backfire, and rates may not start sinking as the president has demanded.

It’s unusual for stocks, bonds and the dollar to fall in tandem, so the initial overnight market moves caught Wall Street’s attention. While the stock market largely stabilized by Monday afternoon, investors will be keen to see whether stocks hold their ground or resume sliding in the coming days. Meanwhile, safe havens like gold sharply rallied.

Gold futures gained 2.35%, hitting a record high above $4,600 a troy ounce. Silver surged 7.4%, outpacing the gains in gold and hitting a record high above $85 a troy ounce.

Stock market investors for now are shrugging off the Justice Department’s investigation into Powell. Investors might think efforts to undermine the Fed’s independence will fail, according to Paul Ashworth, chief North America economist at Capital Economics.

But the surge in gold and silver paired with pressure on the dollar and Treasuries is a signal that Wall Street is bracing for volatility in US markets.

Fed independence is considered a cornerstone of what makes US financial markets exceptional. Investors, economists and historians all regard an independent central bank as key to stable financial markets, as policymakers can set monetary policy without regard to political interests.

The Trump administration embarked on an extraordinary affront to the Fed’s independence last year, lambasting Powell for not lowering interest rates as fast as the president would like.

Lower rates can lead to lower credit card rates and borrowing costs for consumers. But a central bank that lowers rates too quickly without regard to inflation can spook investors, who begin to worry that inflation could run rampant and thus demand a higher return for the risk of investing in American assets — pushing up yields, or borrowing costs, for the US government and consumers.

“A prolonged erosion of confidence in the Federal Reserve’s independence could weigh on the greenback, lift long-term yields and amplify global market volatility — outcomes at odds with the administration’s stated aims,” Karl Schamotta, chief market strategist at Corpay, said in a note.

Sunday’s and early Monday’s trades were a more muted echo of the “Sell America” trade from the spring of 2025, when fear of President Donald Trump’s trade policy sent investors pouring out of American assets. That sent bonds and the dollar tumbling and stocks an inch away from a bear market in April before recovering sharply through the end of 2025 after Trump backed off some of his harshest tariff threats.

“We think the (Sell America) trade may well gather pace, and will in any event have legs, with Fed independence risks a key theme throughout ’26,” Krishna Guha, vice chairman at Evercore ISI, said in a Monday note.

“But we are alive to the possibility the market may not deliver a full-blown riot,” Guha said. “Investors have learned to live with Trump bullying the Fed, Powell has only four months left as Fed chair, there is no immediate threat of removal and Powell has pledged to continue as before.”

The surge in precious metals like gold and silver amid renewed threats to the Fed’s independence is also reflective of what Wall Street has dubbed the “debasement trade”: Investors pile into hard assets like gold and silver — which are not beholden to the reputation of a government or institution — because of worries that currencies and bonds tied to a nation (in this case the United States) will increasingly lose value amid pressure on central banks, mounting debt burdens and concerns about credibility.

Markets had brief moments of panic in 2025 as Trump openly criticized Powell, calling him “too late” and questioning the Fed chief’s ability to run the central bank.

“Our view has been that markets are concerned about threats to Fed independence but had become accustomed to hostile jawboning and would not trade on this fear absent some clear coordinating proof point,” Guha said in a Sunday note. “The subpoenas and Powell’s response could very well be such a coordinating proof point.”

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