[New York Stocks] New York Market Rebounds as Trump Dismisses Powell Dismissal Rumors... Nasdaq Hits Another Record High

Stock Market Wavers on Powell Dismissal Rumors
Rebounds After Trump’s Statement
June Wholesale Price Stability Improves Investor Sentiment

The New York Stock Exchange closed higher across the board on the 16th (local time) after U.S. President Donald Trump dismissed the possibility of firing Jerome Powell, Chairman of the Federal Reserve (Fed). Earlier, reports that President Trump had hinted at Powell's dismissal caused major indices to fluctuate, but the market rebounded after Trump denied the reports.

AFP Yonhap News

On this day, the Dow Jones Industrial Average (Dow) closed at 44,254.78, up 231.49 points (0.53%) from the previous session. The S&P 500 index, focused on large-cap stocks, rose 19.94 points (0.32%) to 6,263.70, while the Nasdaq index climbed 52.69 points (0.25%) to 20,730.49, marking a record high for the third consecutive day.

The New York market started strong in early trading after the U.S. Producer Price Index (PPI) for June came in flat from the previous month, falling short of market expectations. The lower-than-expected U.S. wholesale prices for June helped ease some concerns over inflation from tariffs and had a positive effect on investor sentiment. The Bureau of Labor Statistics announced that the June PPI remained unchanged from the previous month at an annual rate of 2.3%, after being revised up by 0.3 percentage points in May. This is the lowest level since September of last year.

The main factor shaking the market that day was the possibility of Chairman Powell's dismissal. Earlier, U.S. media outlets such as CBS reported that President Trump had asked Republican lawmakers about their opinions on dismissing Chairman Powell during a closed-door meeting the previous day, and that the lawmakers expressed their support.

Following reports that President Trump would soon dismiss Chairman Powell, all three major New York indices turned downward. The S&P 500 index at one point extended its losses to as much as 0.7% during morning trading.

However, the market quickly stabilized after President Trump stated, "I have no plans to dismiss Chairman Powell. The possibility is extremely low unless fraud surrounding the Fed building renovations is revealed." Nevertheless, President Trump also revealed his true feelings by saying, "I would like Powell to resign voluntarily."

As the session progressed, the upward trend strengthened. The Chicago Board Options Exchange (CBOE) Volatility Index (VIX), known as Wall Street's "fear gauge," fell 1.27% from the previous session to 17.16.

Due to concerns over rumors of Powell's dismissal, most major bank stocks closed lower. On this day, Morgan Stanley fell 1.2%, leading the weakness in financial stocks, and other major banks such as Bank of America also ended the session lower.

The bond market also showed instability following reports of Powell's imminent dismissal. Long-term Treasury bonds saw selling pressure, with the yield on 30-year U.S. Treasuries rising by as much as 0.1 percentage points at one point, but turning lower again toward the close. The yield on 10-year Treasuries closed at 4.454%, down 0.033 percentage points. As investors' preference for safe assets increased, gold prices rose 0.7% by the end of trading.

Experts expressed concern that if President Trump were to dismiss Chairman Powell, it would inevitably have a negative impact on the market. In particular, they pointed out that undermining the Fed's independence could weaken confidence in monetary policy and dampen investor sentiment.

Chris Zaccarelli of Northlight Asset Management said, "Dismissing the Fed chairman would have a clear negative impact on the market," adding, "Above all, the potential undermining of central bank independence will be the most sensitive issue for investors."

Larry Tentarelli, founder of Blue Chip Daily Trend Report, also said, "If Chairman Powell is dismissed, the market will definitely react negatively," adding, "Although it is a political controversy, many market participants believe Chairman Powell is doing a good job."