Why is the stock market shrugging off Trump's attempted firing of Fed governor Lisa Cook?

The S&P 500 closed at a record high on Thursday, just days after President Donald Trump moved to fire Federal Reserve governor Lisa Cook, the first such removal in the 112-year history of the central bank.

The attempted ouster came after Trump railed for months against the Fed and its Chair Jerome Powell for declining to heed his call for lower interest rates. For his part, Trump says he removed Cook over mortgage fraud allegations against her. Cook sued Trump on Thursday over the attempted firing.

The clash between Trump and the Fed has stoked concern among many economists about the independence of the central bank, long viewed as a cornerstone of the U.S. economy. The stock market, however, has shrugged.

The major stock indexes have climbed on three consecutive days since Trump attempted to fire Cook. Since then, the S&P 500 has jumped 0.9%, while the tech-heavy Nasdaq has ticked up 1.1%. The Dow Jones Industrial average has increased 0.8% over that period.

The resilience of the stock market owes to overlapping factors, analysts said. These include doubts about whether courts will ultimately grant Cook’s removal, hope for lower interest rates if Cook were to be ousted and the sheer momentum of a monthslong market surge.

“Right now, the message markets are sending is: ‘We really don’t care,'” Steve Sosnick, chief strategist at trading firm Interactive Brokers, told ABC News. “Any concerns aren’t enough to upset the market’s mojo.”

Federal law allows the president to remove a member of the Fed board “for cause.”

In a letter posted on social media earlier this week, the president moved to fire Cook over allegations lodged by a Trump administration official, who claimed she had committed mortgage fraud. Trump pointed to a “criminal referral” from Federal Housing Finance Agency Director William Pulte.

Cook has not been charged for the alleged misconduct and has not directly addressed the substance of the allegations against her. In a statement last week, Cook said she would seek out her financial documents to answer “any legitimate questions and provide the facts.”

Her lawsuit, filed in U.S. District Court for the District of Columbia, describes Trump’s effort as “illegal and unprecedented,” saying Trump’s action violates Cook’s constitutional right to due process, as well as her right to notice and a hearing under the Federal Reserve Act.

In a statement to ABC News, the White House rebutted Cook’s claims, saying Trump’s move to fire her is permitted under federal law. “The removal of a governor for cause improves the Federal Reserve Board’s accountability and credibility for both the markets and American people,” White House spokesperson Kush Desai said.

Hours after Cook filed the lawsuit, a judge granted a hearing for Friday morning. The case has been assigned to Judge Jia M. Cobb, who was nominated to the court in 2021 by former President Joe Biden.

The outcome of the legal fight remains unclear, leaving investors free to shrug off its market implications as they wait to see how the conflict plays out, some analysts said. Plus, they added, Trump would need to seek Senate confirmation for his two appointees: One to replace Cook and the other, Stephen Miran, Trump’s replacement for Adriana Kugler, who retired this month.

If Trump were to replace both Fed board members with loyal appointees, interest rate policy may change less than some economists fear, since the seven-member Fed board would retain a majority made up of appointees from Trump’s first term or other presidents, Jay Ritter, a professor of finance at the University of Florida, said.

“It’s not clear even if Trump succeeds in firing Cook in a timely manner, whether it will have a big effect on Fed policy,” Ritter said.

Seen another way, the appointment of Cook would give Trump appointees from both the first and second term a majority of the seven-member board. The Federal Open Market Committee (FOMC), a 12-member body responsible for setting interest rates, is made up of the seven members of the Fed board as well as a rotating set of five Federal Reserve bank presidents.

In February, the members of the Fed board will oversee the appointment of presidents of the Federal Reserve banks, meaning a potential Trump-appointed majority on the board could aim to install allies.

Even so, some analysts said, stock investors may view the possibility of greater Trump influence over the Fed as a recipe for interest rate cuts, which tend to move stocks higher.

“If replacing Cook leads to lower rates, it would be positive for the market,” Ivan Feinseth, a market analyst at Tigress Financial, told ABC News.

Five meetings and eight months have elapsed since the Fed last adjusted interest rates.

Last week, Powell said the Fed would “proceed carefully” but he hinted at the possibility of an interest rate cut, appearing to indicate greater concern for flagging employment growth than rising prices.

The policy shift may align the Fed with Trump’s desire for lower interest rates, though the central bank is expected to opt for a modest quarter-point reduction rather than the larger cut Trump has sought.