Trump DOJ’s Move Against Jerome Powell Hits Stock Market
The criminal investigation into Federal Reserve Chair Jerome Powell sent waves through global financial markets on Monday, with the significant drops on Wall Street.
Powell confirmed in a rare video address on Sunday that the Department of Justice Department (DOJ) had served grand jury subpoenas to the Fed, saying the criminal probe was unprecedented.
“This is about whether the Fed will be able to continue to set interest rates based on evidence and economic conditions—or whether instead monetary policy will be directed by political pressure or intimidation,” he said.
In early trading on Monday, the S&P 500 fell by 0.3 percent, the Dow Jones Industrial Average dropped more than 400 points, and the Nasdaq was down 0.2 percent.
The U.S. dollar value also fell against the Swiss franc, the euro and other currencies, the Associated Press reported.
The Context
The DOJ’s criminal investigation into Powell marked a dramatic escalation of tensions between the Trump administration and the central bank, inciting significant turmoil in financial markets.
The investigation coincides with Trump calling for a one-year cap of 10 percent on credit card interest rates, raising concerns among banks and market participants that political intervention could disrupt credit access and banking sector profitability.
Many investors interpreted the DOJ’s move as an effort to challenge the Fed’s independence, a principle widely seen as crucial for maintaining monetary stability and investor confidence.
Jerome Powell Video Address: What We Know
The DOJ launched a criminal investigation into Powell, serving grand jury subpoenas to the central bank, Powell confirmed in a video statement on Sunday.
Federal prosecutors are examining Powell’s recent testimony to the Senate Banking Committee regarding the $2.5 billion renovation of the Federal Reserve’s Washington, D.C., headquarters.
Powell, in his public address, described the threat of criminal charges as pretexts to undermine the Fed’s independence in setting interest rates, which he argued are essential for combating inflation and maintaining economic stability.
He warned that the probe was unprecedented and linked the investigation to what he described as pressure from President Donald Trump, who has been openly critical of the Fed’s reluctance to lower interest rates further.
U.S. dollar values declined against major currencies on Monday, while gold and silver futures surged to record highs as investors sought havens amid concerns about U.S. monetary stability.
Bank stocks also saw sharp declines, with Citigroup down almost 4 percent and Capital One falling close to 10 percent, CNBC reported. Technology and semiconductor stocks also retreated, with the sector reflecting the broader risk-off mood.
When Did Jerome Powell Become Fed Chair?
Trump nominated Powell as chair of the Federal Reserve in 2017. His appointment began in February 2018, succeeding Janet Yellen.
While his term as chair is due to end in May, Powell’s seat as a governor on the board extends until January 2028. Powell has not indicated whether he plans to remain at the Fed beyond his current term.
Trump has repeatedly threatened to fire Powell for not lowering interest rates as quickly as he would prefer, and he has signaled that he intends to name a successor soon.
Stocks To Invest in Right Now
Amid heightened uncertainty, financial markets showed clear signs of stress. The announcement of the DOJ’s investigation triggered declines in the S&P, Dow Jones Industrial Average and Nasdaq.
Stock in credit card issuers—including Capital One, American Express, Visa and Citigroup—fell as Trump announced a cap on interest rates for consumer lending.
The Motley Fool reported on Monday that the top three stocks to invest in were Duolingo, Floor and Decor and Wingstop. Previous advice on stock purchases came ahead of the Powell announcement.
Meanwhile, shares in traditional safe-haven assets surged. Gold prices rose 2.4 percent to a record $4,619 an ounce, and silver set its own records, as investors shifted away from dollar-denominated assets, CNBC reported.
Market analysts stressed that during times of uncertainty over central bank independence, assets such as gold historically performed well, referencing similar periods during the inflationary 1970s, The Guardian reported.
Rising U.S. bond yields also suggest expectations for higher inflation if future Fed leadership becomes more politically influenced.
What People Are Saying
Jerome Powell, the Federal Reserve chair, said in a video address on Sunday: “The threat of criminal charges is a consequence of the Federal Reserve setting interest rates based on our best assessment of what will serve the public, rather than following the preferences of the president. This is about whether the Fed will be able to continue to set interest rates based on evidence and economic conditions—or whether instead monetary policy will be directed by political pressure or intimidation.”
Richard Portes, a professor of economics at London Business School, told Newsweek by email on Monday: “I confess that I am surprised that the initial market reactions seem mild, except for the debasement trade. Maybe they think that this move is so over the top that it will indirectly discredit Hassett as the choice to succeed Powell, and that this would be a good outcome (my view!). I am heartened to see that Thom Tillis has come out as he has—it would be good if a few more Republican senators (including some up for reelection) would also finally show they have some spine. This move is so over the top that it might really backfire.”
Ryan Monarch, an associate professor at Syracuse University, told Newsweek in an email on Monday: “It is, of course, uncertain how markets will react. However, the type of ‘sell America’ market movements that we saw around Liberation Day, in which the dollar weakens and stocks fall over concern about the future of American economic policy, is likely if investors believe that Fed independence is at risk.”
Jay Woods, the chief market strategist for Freedom Capital Markets, told CNBC on Monday: “The market has seen this before and doesn’t like it. It’s not about Powell at this point, it’s about the independence of the Fed. So when news like this hits, the knee-jerk reaction is to sell off.”
Krishna Guha, the head of global policy and central bank strategy at Evercore ISI, told CNBC on Monday: “This is unambiguously risk off. We expect the dollar, bonds and stocks to all fall in Monday trading in a sell-America trade similar to that in April last year at the peak of the tariff shock and earlier threat to Powell’s position as Fed chair, with global investors applying a higher risk premium to U.S. assets.”
What Happens Next
Federal prosecutors are expected to continue their criminal investigation of Powell regarding his Senate testimony, while the Federal Reserve’s next key meeting later this month will be closely watched for any policy changes.
Analysts and investors are monitoring the situation for further signals from the Justice Department and the Trump administration as tensions over central bank independence escalate.
Powell’s term as Fed chair expires in May, and the outcome of the investigation and its political ramifications could have lasting implications for monetary policy and investor confidence in U.S. markets.
Update 1/12/26, 11:46 a.m. ET: This story has been updated with more information.
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